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Portfolio: Return, Risk, and Diversification
Calculate the return and risk of a two-asset portfolio and measure the diversification effect.
Stock AnalysisIntermediateCalculation
You're building a portfolio with two ETFs: an Equity ETF (S&P 500) and a Bond ETF (Aggregate Bond). Measure the diversification impact.
Given
| Equity ETF return | 10 %/an |
| Bond ETF return | 3 %/an |
| Equity volatility | 18 % |
| Bond volatility | 5 % |
| Correlation | 0.1 |
| Equity allocation | 60 % |
| Bond allocation | 40 % |
Question 1/3
Step 1. What is the expected return of the 60/40 portfolio?
Your answerEnter a number in %
%
0/3