VAR (Value at risk) and weighted portfolio?

Question

I am calculating my VAR(value at risk) for a portfolio. Assuming I have 10 funds in that portfolio and would like to apportion their VAR according to the portfolio size. At which stage of my VAR calculation do I do that?

Do I weight it when I am calculating the VAR for each fund, or should I do it when I am combining to calculate the portfolio VAR? If the latter, what formula should I use as there is correlation between all the funds.

Answer 1

One has to calculate the portfolio mean and standard deviation from the individual means and the full correlation matrix, using the weights. The formulas are explained here:

http://en.wikipedia.org/wiki/Value_at_ri...