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Month Market Index (points) Hydro Ltd ($) Luna Ltd ($) 1 5745 21.00 0.56 2 5976 23.55 0.66 3 6057 21.99 0.71 4 6167 23.70

  1. Month

    Market Index (points)

    Hydro Ltd ($) Luna Ltd ($)

    1

    5745

    21.00 0.56

    2

    5976 23.55 0.66

    3

    6057 21.99 0.71

    4

    6167 23.70 0.90

    5

    6147 23.90 0.90

    6

    6117 24.65 0.95

    7

    5869 24.06 0.93

    8

    6072 26.82 1.00

    9

    6124 30.04 1.10

    10

    6290 30.90 1.15

    11

    6366 31.59 1.48

    12

    6427 28.44 1.66

    13

    6325 26.50 1.46

    14

    5913 23.66 1.31

    15

    5749 21.84 1.49

    16

    5709 24.63 1.52

    17

    5937 24.62 1.50

    18

    6252 24.51 1.50

    19

    6261 26.08 1.57

    20

    6418 29.12 1.55

    21

    6491 30.72 1.61

    22

    6699 30.65 1.57

    23

    6896 29.75 1.62

    24

    6698 30.60 1.57

    25

    6800 31.62 1.85

    26

    6772 33.92 1.91

    27

    6948 33.67 1.97

    28

    6802 36.20 1.98

    29

    7121 33.11 2.23

    30

    6501 21.35 2.05

    31

    5342 25.49 2.02

    32

    5625 25.72 1.99

    33

    5933 25.50 1.93

    34

    6031 26.18 1.93

    35

    6078 28.37 1.94

    36

    6245 29.97 1.85

    37

    6178 28.63 1.78

    38

    6256 32.06 1.75

    39

    6742 31.00 2.19

    40

    6850 31.06 2.40

    41

    6895 30.36 2.29

    42

    6955 34.35 2.17

    43

    7080 37.17 2.15

    44

    7320 41.05 2.06

    45

    7450 43.09 1.92

    46

    7611 41.64 2.10

    47

    7723 45.67 2.13

    48

    7897 46.95 2.19

    49

    7689 46.68 2.20

    50

    7712 44.11 2.20

    51

    7658 43.57 2.14

    52

    7802 40.35 2.20

    53

    7793 37.27 2.26

    54

    7315 36.70 2.18

    55

    7824 33.66 2.19

    56

    7789 33.79 2.29

    57

    7724 34.38 2.34

    58

    7455 35.30 2.25

    59

    7360 36.25 2.33

    60

    7477 36.44 2.25
    4-Determine the expected return and standard deviation of a two-asset portfolios comprised of Hydro Ltd and Luna Ltd; Assume equal weightings of each share within the portfolio. Interpret your results and comment and illustrate the impact on risk when combining shares into a portfolio. What is the exact amount of risk reduction when combining these 2 shares in the portfolio? What has caused this risk reduction in the portfolio and what specific risk has been eliminated in this case?

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