For the portfolio in Problem 23, if the correlation between Johnson & Johnsons and Walgreens stock were

Question:

For the portfolio in Problem 23, if the correlation between Johnson & Johnson’s and Walgreens’

stock were to increase,

a. Would the expected return of the portfolio rise or fall?

b. Would the volatility of the portfolio rise or fall?

suppose Johnson & Johnson and Walgreens Boots Alliance have expected returns and volatilities shown below, with a correlation of 22%.
Expected Return Standard Deviation Johnson & Johnson 7% 16%
Walgreens Boots Alliance 10% 20%.

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