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Alia Bhat holds a well-diversified portfolio of stocks in XYZ group. During last five years return on these stocks have on average 20% per year
Alia Bhat holds a well-diversified portfolio of stocks in XYZ group. During last five years return on these stocks have on average 20% per year and standard deviation 15%. Alia is satisfied with return of portfolio but want to reduce risk without affecting overall returns. As a FIN student, she approaches you to help in finding in suitable diversification medium. After a lengthy review of alternatives, you conclude following investment could be made Groups Expected Return Correlation of XYZ with Standard Deviation ABC 20% + 1 15% KLM 20% - 1 15% RST 20% + 0 15% IF Alia invests 50% of his funds in ABC and rest 50% in XYZ group, would
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