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Recalculate portfolio expected return and standard deviation

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Reference no: EM132763476

Question - The expected return on Big Time Toys is 12% and its standard deviation is 21.6%. The expected return on Chemical Industries is 9% and its standard deviation is 27.4%.

a. Suppose the correlation coefficient for the two stocks' returns is 0.28. What are the expected return and standard deviation of a portfolio with 53% invested in Big Time Toys and the rest in Chemical Industries?

b. If the correlation coefficient is 0.78, recalculate the portfolio expected return and standard deviation, assuming the portfolio weights are unchanged.

c. Why is there a slight difference between the results, when the correlation coefficient was 0.28 and when it was 0.78?

Reference no: EM132763476

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