Note: All assumptions are in blue.

The case of 2 risky assets: Calculating the Variance of the P

Stock X Stock Y Corr Cov Std(Rp) (Wx)^2*V(Rx)
Expected Return 10 10 1 64 8.00 16
Std of the Return 8 8 0.5 32 6.93 16
0 0 5.66 16
Wx Wy -0.5 -32 4.00 16
Portfolio: 0.50 0.50 -1 -64 0.00 16
Corr(Rx,Ry) ↓ Prtfolio volatility ↓

The case of 3 risky assets:

Correlation Matrix
Stock X Stock Y Stock Z X Y Z
Expected Return 10 10 10 X 1 0 0
Std of the Return 8 8 8 Y 0 1 0
Z 0 0 1
Wx Wy Wz
Portfolio: 0.33 0.33 0.33 Variance-Covariance Matrix
Proportion: 0.33 0.33 0.33
Asset: X Y Z
0.33 X 64 0 0
0.33 Y 0 64 0
0.33 Z 0 0 64

Calculating Var(Rp): 7.11 0 0

0 7.11 0
0 0 7.11

Var(Rp) = SUM(H26:J28) = 21.33

Two assets: Std(0.5*Rx+0.5*Ry) = 5.66

Three assets: Std(0.33*Rx+0.33*Ry+0.33*Rz) = 4.62
# of assets ↑
Prtfolio volatility ↓
ating the Variance of the Portfolio Return:
(Wy)^2*V(Ry) 2*Wx*Wy*Cov(Rx,Ry) V(Rp)
16 32 64
16 16 48
16 0 32
16 -16 16
16 -32 0