The formula \delta Var = \frac{1- \rho}{2} will be valid with a weight of asset w_1 = w_2 = 0.5, isn't it? Otherwise if not stated (sorry if im missing it) seems a sort of a magic. In short, VaR (p folio risk) is depending from quantity not just st dev.
Hey Jakub, thanks for the Newsletter / Article
The formula \delta Var = \frac{1- \rho}{2} will be valid with a weight of asset w_1 = w_2 = 0.5, isn't it? Otherwise if not stated (sorry if im missing it) seems a sort of a magic. In short, VaR (p folio risk) is depending from quantity not just st dev.
Thanks!
Yes, it's under the assumption of equal weights (w_1 = w_2 = 0.5) and equal individual volatilities (σ₁ = σ₂ = σ) for the two strategies.