# Scrutiny of Property as an Investment Class

The theory of risk and return are vital to investment theory and practice. The more the anticipated risk, the greater is generally the return called for. Risk is a calculation of what is anticipated to occur but not what is really happening. Investment determinations nevertheless need the inference of an unidentified future return, which is known as expected return.
Since there is a series of probable results there is no assurance that the estimation will be accurate, but it is the most excellent likely evaluation. The increase of allocation of anticipated returns about the entire expected mean estimation is typically calculated by the standard deviation (σ), or its square, the variance (σ2), and this is the typical risk measure.
When assets are pooled in a portfolio, the anticipated return is a subjective mean of the individual asset’s predictable return. The weights are the ratios of these assets accommodated in the portfolio. The portfolio risk is composite. The portfolio risk reckons not only on the weights and the individual changes but also on the correlativity between the assets. The correlation coefficient, ρ, assess joint moves between the two variables and how they vary jointly.
The rate can differ from –1.0 to +1.0, even though for the majority of the variables, the correlation coefficient lies between these two values. The risk will be maximum when all correlations are entirely correlated (+1). In reality, assets are replacements for each other, and this leads to an increase or decrease of one asset in increasing or decreasing the value of the other in the same proportions. The threat of the portfolio is the weighted mean of the risks of the assets in the portfolio.
When the relationship is -1.0, the return is absolutely negative correlated which means that with the increase or decrease in the value of one variable the other variable will move in the opposite proportions. The correlation coefficient for assets without any correlation at all is zero (Perold, 2004).
According to Hoesli, M., and MacGregor, B. D., (2000), the first stage was to compute the expected return and risk of each individual asset and to use these to calculate the portfolio expected return and risk from all possible combination of weights, using both linear programming and investing. In reality, no two assets can ever be completely correlated as their income is impacted by diverse factors. When all of the correlations are fully correlated, the risk is constantly less than the weighted mean. In this event, some of the risks from one asset can be counterbalanced to an extent by the other asset, so that the standard deviation of the portfolio always remains lesser than the mean risk of the weighted average of the standard deviation of each item. This is the foundation of variegation and portfolio creation.