Integrated cases: a foreign bond with currency, and pairs from a scenario table

In short

• A foreign asset in a domestic portfolio is three positions: domestic equity, the foreign asset's local return and the exchange-rate return. The currency carries the same weight as the foreign asset.
• Expected return: compound the local and currency returns, then take the weighted average. Risk: the three-asset variance formula with every pair's correlation.
• A bond that looks safer in its own currency can still raise portfolio risk once currency is added, especially when the currency moves with equities.
• Scenario table: a pair's return in each scenario is the weighted average of that row. If the pair's return never changes, the two assets are perfectly negatively correlated.
• Equal weights remove all risk from a $\rho = -1$ pair only if the two standard deviations are equal; otherwise solve $w_1\sigma_1 = w_2\sigma_2$.