For each of the six cases in exercise 4.14, ABCO wants to consider what would happen to the return variance of ABCO’s $4 billion in stock if it revised the relative investment proportions in the two remaining subsidiaries. In particular, for each of the six possible sell-off scenarios, what proportion of the $4 billion should be invested in the two remaining subsidiaries if ABCO were to minimize its variance? Assume that short sales are not permitted.

ABCO is a conglomerate that has $4 billion in common stock. Its capital is invested in four subsidiaries:
entertainment (NET), consumer products (CON), pharmaceuticals (PHA), and insurance (INS). The four subsidiaries are expected to perform differently, depending on the economic environment.AppendixLO1

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Investment Poor in $millions Economy Average Good Economy Economy ENT $1,200 +20% -5% -8% CON 800 +15 +10 -20 PHA 1,400 -10 -5 +27 INS 600 -10 +10 +10