Example: scenario analysis You plan to invest $1000 in TSLA and $4000 in AMZN. In case of a recession next year, you think TSLA will have a return of -20% and AMZN will have a return of -10%. In case of an expansion next year, you think TSLA will have a return of 30% and AMZ will have a return of 20%. You think the likelihood of a recession is 40% and the likelihood of an expansion is 60%. What do you expect your return next year to be? How risky is your portfolio? Example: using past data You plan to invest $1000 in TSLA and $4000 in AMZN. You gather data and you find that for the past 3 years, TSLA returns have been -20%, 20% and 10% respectively, and AMZN returns have been 10%, 5% and 20% respectively. What do you expect your return next year to be? How risky is your portfolio