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Part 2 (25 marks) - risk and return You are considering investing in stocks and have identified the following potential stocks. They are Alibaba Group Holding Limited (BABA), Amazon (AMZN), Kogan (KGN) and China Petroleum \& Chemical (386). The table below shows the historical share prices (\$) between 2016 and 2022. Note that these prices are recorded on the 1st day of the year, for example, 1st of January 2020 . Students should assume no dividend is distributed during this period and ignore the exchange rate conversion. 5. (3 marks) Page 5 of 6 Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Amazon and 50\% in Alibaba. 6. (3 marks) Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 80% in Amazon and 20% in China Petroleum. 7. (3 marks) Compare the portfolios in parts 5 or 6 . Which portfolio (parts 5 or 6 ) provides better diversification? Define diversification and explain your answer(s). Part 2 (25 marks) - risk and return You are considering investing in stocks and have identified the following potential stocks. They are Alibaba Group Holding Limited (BABA), Amazon (AMZN), Kogan (KGN) and China Petroleum \& Chemical (386). The table below shows the historical share prices (\$) between 2016 and 2022. Note that these prices are recorded on the 1st day of the year, for example, 1st of January 2020 . Students should assume no dividend is distributed during this period and ignore the exchange rate conversion. 5. (3 marks) Page 5 of 6 Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Amazon and 50\% in Alibaba. 6. (3 marks) Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 80% in Amazon and 20% in China Petroleum. 7. (3 marks) Compare the portfolios in parts 5 or 6 . Which portfolio (parts 5 or 6 ) provides better diversification? Define diversification and explain your answer(s)