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Calculating R-squared of portfolio

Discussion in 'Shares' started by DefiniteIntegral, 14th Aug, 2016.

  1. DefiniteIntegral

    DefiniteIntegral New Member

    14th Aug, 2016
    Perth, WA

    Not really sure which sub-forum to post this, so just putting it in general. I am wondering how to calculate the R-squared of a weighted portfolio of stocks (without using Excel).

    For a single stock's returns I can calculate correlation coefficient relative to market and square it to get coefficient of determination. I can also calculate beta for the individual stocks.

    My issue is trying to calculate for a weighted portfolio.

    I can use weighted sum of betas to calculate portfolio beta.

    But I don't know how to calculate the coefficient of determination for that weighted portfolio in order to measure the reliability of that portfolio beta.

    Is there some easy way to calculate it from the individual stock statistics? For example would it be as simple as a weighted sum of stock coefficients?

    Or would I need to calculate the periodic weighted returns over time for the portfolio and use that to calculate coefficient of determination the same way as a single stock?