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In addition to avoiding a potential disaster associated with over investing in a single
security, portfolios also generally offer equivalent expected returns with lower over-
all volatility of returns—as represented by a measure such as standard deviation.
Consider this simple example: Suppose you wish to make an investment in companies
listed on the Hong Kong Stock Exchange (HKSE) and you start with a sample of five
companies.4 The cumulative returns for the five companies from Q2 2004 through
Q2 2008 are shown in Exhibit 3
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