Construct your own investments portfolio by allocating your funds in the following two risky assets:

Stocks (select which stocks)

Bonds (select which type of bonds)

Decide the weight given to each investment asset

Given the 4 possible scenarios:

Severe Recession

Mild Recession

Economic Growth

Economic Boom

Assign the likelihood of each of these scenarios happening based on your expectations.

Calculations:

Calculate expected returns, variance, standard deviation of these asset categories individually

Then run the same calculations for your combined portfolio.

Calculate the correlation coefficient of your combined portfolio.

Run a sensitivity analysis where you assign different types of weights to your combined portfolios and explain how the risk-return tradeoff varies with different assigned weights.

Analysis: Please explain your analysis of the results.

After running the sensitivity analysis, which is the most optimal investment opportunity set?

Based on your portfolio creation, where you able to diversify and reduce risk?