Problem:
Your Company has a portfolio made up of 2 assets, One from the USA and the other from Swaziland. Their information is as follows:
USA Swaziland
Return 12.2% 18.4%
Deviation 10.5% 23.8%
Weight 50% 50%
The company has asked me to estimate risk and return involved in the existing portfolio (the correlation is .15). They then asked me to estimate if Swaziland holdings were sold and replaced with assets from Pushistan, What the impact on risk and return would be (the correlation here is .09). Then choose the best based on lowest risk levels.
Pushistan
Return 16.7%
Deviation 14.9%
Weight 50%