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[Eduard Kas]

Dear subscribers,

I am relatively new to proFit and I'm wondering whether the following  
calculation can be done with proFit.

For an assignment I would like to calculate the variance of a  
portfolio of projects. This in accordance with the formula (for a  
'three projects' situation):

x1^2 * Var(x1) + x2^2 * Var(x2) + x3^2 * Var(x3) + 2 * x1 * x2 * sd 
(x1) + sd(x2) * corr (x1x2) + 2 * x1 * x3 * sd(x1) * sd(x3) * corr 
(x1x3) +

2 * x2 * x3 * sd(x2) * sd(x3) * corr(x2x3)

where: x1, x2, x3  are weightings in the portfolio, in terms of  
investment value; Var = variance; sd = standard deviation; and corr =  
correlation

In the above example with only three projects there are just  two  
correlation terms. This calculation is still relatively easy to  
handle. For a portfolio with 38 projects the calculations is however  
a much lengthier process. I would like to start as follows: define 41  
columns: one for the projects weightings, one for the variance, and  
38 columns that are filled with the correlations of a project with  
each of the other projects in the portfolio. (The standard deviation  
of a project can of course be calculated as the square root of the  
variance of the same project); and define 38 rows, one row for each  
of the projects. In this example we have 38 terms in which the  
squared values of a project weighting are multiplied by the variance  
of that project and 361 terms that include a correlation of a project  
with another project (that is, 38 * 37 / 2 = 361).

A complication in the calculation is that in a 'three porject  
situation' only three correlations are relevant, in order to  
calculate the project variance. In the example below only one 0.8,  
one 0.6, and one 0.5. As we know the correlation between projects x1  
and x2 we also know the correlation between projects x2 and x1. We  
are also not interested in the correlation of a project with its own.  
(See the three "1s" in the example below.)

1.0		0.8		0.6

0.8		1.0		0.5

0.6		0.5		1.0

Think that the above calcutions are related in some way to vectors or  
matrices, but I really don't know where to start and how to proceed.

Does anyone know how the above can be handled in proFit? Any help  
would be very much appreciated.

Best regards,


Eduard Kas