Question: Google and Vodafone. An investor is evaluating a two-asset portfolio of the following securities:
Assumptions Expected Return Expected Risk(σ) Correlation(ρ)
Google(U.S.) 18.60% 22.80% 0.60
Vodafone(U.K.) 16.00% 24.00%
a. If the two securities have a correlation of +0.6, what is the expected risk and return for a portfolio that is equally weighted?
b. If the two securities have a correlation of +0.6, what is the expected risk and return for a portfolio that is 70% Google and 30% Vodafone?
c. If the two securities have a correlation of +0.6, what is the expected risk and return for a portfolio that has the minimum combined risk.