Select a combination of the nine assets and create a portfolio in which the expected return is not overly compromised and the risk (as measured by standard deviation) is lowered. Does it take all nine assets? Does using all nine produce a better return than just using, say, three?
It is recommended that you select your nine assets from among public securities (i.e., stocks, bonds, mutual funds, ETF’s, etc.) because historic and current data is abundant and easy to access. As you select and analyze your assets, remember why the concepts of correlation and diversification are important to portfolio construction. Also, remember the importance of assessing expected returns on a risk-adjusted basis.
Remember that risk-adjusted returns can be easily quantified by using the Sharpe Ratio. The Sharpe Ratio is a simple statistic that essentially defines “expected return per unit of risk” and allows a comparison of assets and combinations of assets on a standardized basis. The formula for the Sharpe Ratio is: [(Expected Return – Risk-free Rate) / Standard Deviation].
You must include a discussion on correlation as a justification for your allocation. Refernce https://smartmoney.angelone.in/chapter/the-correlation-matrix-and-the-variance-of-a-portfolioLinks to an external site. as an example of this math.