Portfolio Diversification / Correlation implementation

Binding contract

This record describes what an executable surface must bind and validate. It does not claim that a public calculator, package, or production route is deployed.

Record owner

Guth Instruments

Lifecycle

verified-clean

Evidence ID

t6-051

Effect

Computation or source lookup only

Input and validation requirements

Inputs outside the correlation domain can produce a negative portfolio variance and an undefined square root. The instrument must validate rho in [-1,1] and reject any case where the computed variance is negative instead of returning NaN or an invalid risk value.

Required corrections

No binding erratum is attached to this unique-name record. Implementers must still preserve the declared units, domain, and failure behavior.

Inspectable interface fixture

The sample below is evidence for interface and validation tests, not a production implementation.

{
  "inputs": {
    "w1": 0.6,
    "w2": 0.4,
    "R1": 0.08,
    "R2": 0.12,
    "sigma1": 0.15,
    "sigma2": 0.25,
    "rho": 0.2,
    "units": "decimal returns and decimal standard deviations"
  },
  "expected_outputs": {
    "portfolio_expected_return": 0.096,
    "portfolio_variance": 0.0217,
    "portfolio_risk_sigma": 0.1473091986,
    "plot_sample": {
      "x_portfolio_risk": 0.1473091986,
      "y_portfolio_return": 0.096
    }
  },
  "working": "Weights check: 0.6 + 0.4 = 1. Return: Rp = 0.6×0.08 + 0.4×0.12 = 0.048 + 0.048 = 0.096. Variance: σp² = 0.6²×0.15² + 0.4²×0.25² + 2×0.6×0.4×0.15×0.25×0.2 = 0.36×0.0225 + 0.16×0.0625 + 0.0036 = 0.0081 + 0.0100 + 0.0036 = 0.0217. Risk: σp = sqrt(0.0217) = 0.1473091986."
}

Other records

Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

• VERIFIED_LEDGER.json
• evidence-tranche6/tranche6-results.json