In QMiF (p. 239) , the variance of a portfolio is defined as:
V(R) = w'Vw = w'DCDw = x'Cx
Does this formula hold if the weights are negative (i.e., short)?
For example, if I have a 5x5 covariance matrix of various futures contracts and my position is:
n_01: -100 n_02: 230 n_03: -140 n_04: -79 n_05: 290
Can I simply use the formula above and arrive at the portfolio risk if i take the square root of the variance equation above?