Math  /  Data

QuestionCalculate the expected return rpr_{p} for a portfolio of stocks L (40\%) and M (60\%) over 2013-2018, then find rˉp\bar{r}_{p} and σrp\sigma_{r_{p}}. Discuss correlation and diversification benefits.

Studdy Solution
To discuss the benefits of diversification achieved by Jamie through creation of the portfolio, consider the standard deviation of portfolio returns. If this is lower than the standard deviations of the returns of the individual stocks, Jamie has achieved diversification benefits, as his portfolio risk is lower than the risk of the individual stocks.

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