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If these two assets are in the same portfolio, would that be better or worse for the portfolio return? Can you tell by a quick examination, and how?

The actual question is at the bottom in bold, the first two are needed in order to answer but the first two are already answered.
Calculate the expected return on an asset that has the following probable
returns:
Order Return (%) Probability
1 6 3/4% .39
2 8.25% .27
3 9.5% .19
4 7% .09
5 4% .06
Answer: Expected Return: 6.4119
If you compare the asset in Exercise 1 to the following asset, can you quickly
tell which one is riskier?
Order Return (%) Probability
1 9% .29
2 10% .25
3 6.5% .22
4 5% .15
5 4% .09
Answer: Expected Return: 1.4086
 

ACTUAL Question: 
If these two assets are in the same portfolio, would that be better or worse for the portfolio return? Can you tell by a quick examination, and how?
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1 Answer

Hi Jasmine, a quick way to tell if an asset is more risky than another would be to look at the distribution of its probabilities of returns. By doing so, it appears the second asset, though with its relatively higher returns, is more risky given its higher probability of incurring lower 4% - 5% returns. For the second questions of whether or not having these two assets in the same portfolio would be better or worse for the portfolio as a whole, one needs to calculate the covariance between two, or sometimes even more, assets. A low covariance would be good for the portfolio as a whole due to its diversifying effect, thereby reducing risk.