Problem - Assume you own a portfolio of 25 different "large cap" stocks. You expect your portfolio will have a return of 12% and a standard deviation of 15%. A colleague suggests you add gold to your portfolio. Gold has an expected return of 8%, a standard deviation of 25%, and a correlation with your portfolio of -0.05. If the risk-free rate is 2%, will adding gold improve your portfolio's Sharpe ratio? Is it a good idea to add gold to your portfolio?

- Assume you own a portfolio of 25 different "large cap" stocks. You expect your portfolio will have a return of 12% and a standard deviation of 15%. A colleague suggests you add gold to your portfolio. Gold has an expected return of 8%, a standard deviation of 25%, and a correlation with your portfolio of -0.05 . If the risk-free rate is 2%, will adding gold improve your portfolio's Sharpe ratio? Is it a good idea to add gold to your portfolio