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You are going to invest in Asset J and Asset S. Asset J has an expected...

You are going to invest in Asset J and Asset S. Asset J has an expected return of 13 percent and a standard deviation of 54 percent. Asset S has an expected return of 10 percent and a standard deviation of 19 percent. The correlation between the two assets is 0.50. What are the standard deviation and expected return of the minimum variance portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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Answer #1
Asset J Asset S
Return 13% 10%
Standard deviation σ 0.54 0.19
Variance σ^2 0.2916 0.0361
Corr 0.5

Given this data, calculate the variance and the standard deviation of a portfolio consisting of asset J and asset S in the ratio of 1:1.

Portfolio variance = (WJ^2*VarJ) + (WS^2*VarS) + (2WJWSStDevJStDevS.corr)

Portfolio standard deviation = portfolio variance^0.5

Once this data is in place, solve using excel Solver to get a minimum value of variance by changing the weights of assets.

The minimum variance portfolio is:

Asset J Asset S
Weight 0.00% 100.00%
Expected return 10.00%
Variance 0.0361
Standard deviation 19.00%
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