An investor wants to invest in two shares, X and Y. The following data are available for the two shares:
Share X has :
Expected Return: 11%
Standard Deviation: 16%
Beta: 1.22
Share Y has:
Expected Return: 8%
Standard Deviation: 12%
Beta : .92
What happens to the expected return and standard deviation of returns of the portfolio if the following conditions exist?
i) The correlation of returns between Share X and Y is +0.7
ii) The correlation of returns between Share X and Y is -0.8
iii) The correlation of returns between Share X and Y is 0.0