This chapter showed us how to calculate the expected return and variance for individual securities, and the
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This chapter showed us how to calculate the expected return and variance for individual securities, and the covariance and correlation for pairs of securities. Given these statistics, the expected return and variance for a portfolio of two securities A and B can be written as:
Expected return on portfolio Var(p
XARA XBRB ortfolio) XAA XAXBAB XBB LO.1
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