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A risk-averse investor is considering the addition of an asset to a well- diversified stock portfolio. The two securities under consideration both have an expected
A risk-averse investor is considering the addition of an asset to a well- diversified stock portfolio. The two securities under consideration both have an expected return of 15 percent and a standard deviation of 12 percent. The correlation of Asset A with the market is 0.75, while the correlation of Asset B with the market is 0.50. Which asset should the risk-averse investor add to his/her portfolio?
A) Asset A.
B) Asset B.
C) Cannot tell without more information.
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