The expected return of a portfolio of two investments will be equal to the sum of the expected returns of the two investments plus twice the covariance between the investments.

Covariance

A measure that indicates the extent to which two random variables change in tandem.

Expected Returns

The anticipated profit or loss from an investment over a specific period, often used to evaluate the attractiveness of a financial asset.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.