When opening this spreadsheet, you will be asked if you want to re-establish links. Click "No" when this question appears (since you do not have the linked spreadsheet). This spreadsheet uses a simple example to illustrate the effect on portfolio risk of diversification and leverage. It also shows historical returns of Monsanto, Anheuser-Busch, and McDonnell-Douglas and the return of an equally weighted portfolio of the three stocks. Consistent with general theory, the average return of the portfolio is a weighted average of the average returns of the three stocks, but its risk is strictly less than a weighted average of the risks of the three stocks, due to the benefits of diversification. A graph also shows that a portfolio of all the stocks traded on the New York Stock Exchange has even lower risk. The contribution of a stock to the risk of a diversified portfolio is measured by its beta. The spreadsheet uses Anheuser-Busch returns to illustrate the concepts of market risk, idiosyncratic risk, and beta.