Suppose we obtain the following data in dollar terms:
|
Stock market
|
Return (mean)
|
Risk (SD)
|
|
United States
|
1.26% per month
|
4.43%
|
|
United Kingdom
|
1.23% per month
|
5.55%
|
The correlation coefficient between the two markets is 0.58. Suppose that you invest equally, i.e., 50% each, in the two markets. Determine the expected return and standard deviation risk of the resulting international portfolio.
What is the expected return of the equally weighted portfolio and Standard deviation risk?
Also give interpretation and explain answer with all calculation.