You are considering an investment in the stock market and have identified three potential stocks, they are Crown (ASX: CWN), Tencent (HKG: 0700) and Commonwealth Bank (ASX: CBA). The historical prices for the past 10 years are shown in the table below. Assume no dividend is distributed during this period.

4. Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Crown and 50% in Tencent.

5. Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 40% in CBA and 60% in Tencent.

6. Which portfolio (parts 4 or 5) provides better diversification? Explain your answer(s).

Year 2010 2011 2012 2013 2014 2015 2016 2017 Crown 7.76 8.57 8.09 11.59 16.68 13.61 12.27 11.4 Tencent 29.04 40.40 37.94 54.28 108.70 132 144.90 204.40 463.60 346 Commonwealth (CBA) 53.63 52.15 50.39 64.10 73.83 88.85 78.67 81.66 78.87 69.91 2018 2019 13.25 11.95