1) Discuss the concepts of specific risk and market risk in investment

2) Explain how portfolio diversification reduces investment risk

3) Create a hypothetical example of a 3-stock portfolio, select some weights for each stock in the portfolio, assign values to standard deviation and expected return of each stock. Further create hypothetical numbers for the correlation coefficients between each pair of stocks and then calculate the expected return and standard deviation of your portfolio and interpret the results. 

Answer rating: 100% (QA)

1 Specific Risk and Market Risk Specific risk also known as unsystematic risk or idiosyncratic risk refers to the risk that is inherent to a specific company or asset It represents the risk factors th... View the full answer