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 finance. Just like standalone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Jacques is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: Stock Artemis Inc. Babish & Co. Cornell Industries Danforth Motors Percentage of Portfolio Expected Return Standard Deviation 20% 30% 35% 15% The expected return on Jacques's stock portfolio is 6.00% 14.00% 13.00% 5.00% 23.00% 27.00% 30.00% 32.00% Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (p 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio's standard deviation ( d) most likely is 28). Stock Artemis Inc. Babish & Co. Cornell Industries Danforth Motors Percentage of Portfolio Expected Return 20% 30% 35% 15% The expected return on Jacques's stock portfolio is 6.00% 16.05% 4.00% 10.70% 14.45% 8,03% 3.00% 5.00% Standard Deviation 23.00% 27.00% 30.00% 32.00% Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (p= 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio's standard deviation ( ap) most likely is 28%. table: Stock Artemis Inc. Babish & Co. Cornell Industries Danforth Motors The expected retu Suppose each sto the risk (standard ap) most likely is Percentage of Portfolio 20% 30% 35% 15% equal to more than s's stock portfolio is Expected Return 6.00% 14.00% 13.00% 5.00% Standard Deviation 23.00% 27.00% 30.00% 32.00% less than i eding portfolio has a correlation coefficient of 0.4 (p= 0.4) with each of the other stocks. If the weighted average of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio's standard deviation ( 28%