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  3. 3. now, we form a portfolio with two assets. both

3. Now, we form a portfolio with two assets. Both are risky asset. How can...

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3. Now, we form a portfolio with two assets. Both are risky asset. How can we get the return and the variance of this portfolio? Please show the formula to get them. By what value of the correlation between them can these two assets perfectly hedge each other's risk? 4. Please use the following equation to explain the mechanism of diversification. And which part of risk can be eliminated? (The following equation is on slide 33 of chapter 7.) op n-1 72 + COV n n

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