An investor plans to create a portfolio. One choice is to combine stocks A and B with 50% and 50% weight in each. If the return of A=20% and the return of B=16% what will be the portfolio return? Another choice is to combine A with stock C. Stock C has the same return (16%) as B.

However. the investor finds that the correlation coefficient between A and B is 0.7, while the correlation coefficient between A and C is -0.7. Which choice (A and B or A and C) should the investor take and why?