7. Portiolio expected return and risk A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are aiso exposed to risk. Aortfolio risk refers to the possibility that an irvestruent portfolio will not generate the investor's expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Andre is an' amateur tnvestor who holds a small portfollo consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: What is the expected return on Andre's stock portfolio? 13.10% 9.70% 7.28%5 14.55% Suppose each stock in Andre's portfolio has a correlation coefficent of 0.4(=0.4) with each of the other stocks. If the weighted average of the risk of the individual securities (as measured by their standard deviations) induded in the partially diversified four-stock portfolio is 30%, the portfolio s standard deviation (p) most likely is 30%