Risk10 / 32
MediumPortfolio & RiskAcceptance 52%
Diversification & Sharpe
AQR CapitalCitadel
Two uncorrelated strategies each have a Sharpe ratio of 1 and the same volatility. If you allocate equally to both, what is the combined Sharpe ratio? (Round to 2 decimals.)
Approach
Returns add, variances add (uncorrelated).
Sharpe improves by √(number of independent bets).
Answer
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The answer is 1.41. Sign in free for the full worked solution and to check your own answer.
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