6 Expected return, risk and diversification (LO 5) Harry Jones has invested one third of his funds in Share and two-thirds of his funds in Share 2. His assessment of each investment is as follows: Item Share1 Share 2 Expected return (%) 15.0 21.0 Standard deviation (%) 18.0 Correlation between the 0.5 returns a) What are the expected return and the standard deviation of return on Harry's portfolio? b) Recalculate the expected return and the standard deviation where the correlation between the returns is O and 1.0, respectively. c) Is Harry better or worse off as a result of investing in two securities rather than in one security 25.0