Fig. 1 Gains from Diversification.TABLE 1 Portfolio Returns
Proportion Invested Volatility (s) when
Correlation Coefficient (?)
In X In Y
Expected
Return =1.0 =0.5 =-1.0
1.00 0.00 2 0.00 10.00 10.00 10.00
0.95 0.05 20.50 10.30 9.92 8.70
0.90 0.10 21.00 10.60 9.90 7.40
0.85 0.15 21.50 10.90 9.92 6.10
0.80 0.20 22.00 11.20 9.99 4.80
0.75 0.25 22.50 11.50 10.11 3.50