You expect HGH stock to have a 15% return next year and a 35% volatility. You have $100,000 to invest, but plan to invest a total of $125,000 in HGH, raising the additional $25,000 by shorting either KBH or LWI stock. Both KBH and LWI have an expected return of 10% and a volatility of 30%. If KBH has a correlation of +0.6 with HGH, and LWI has a correlation of -0.6 with HGH, which stock should you short?

Risk-Free Saving and Borrowing AppendixLO1