RMontgomery

If Rf=5% and my current portfolio's E(Rp)=10% with STDp=20%. So, current Sharpe_p = 0.25 (for every 1% added risk, I get 0.25 extra return). If another asset has correlation=-1 with my portfolio, and it has E(Ra)=12%, and STDa=25%.

My portfolio's Sharpe is positive. If I add this new asset, and it gets the expected 12% return, my portfolio's return without the asset will be negative (they are negatively correlated), so how do I gain by adding the new asset?

I'm now starting to review PM and concepts like these are blurred in my mind.