Question
Annual returns of three stocks are given below. Two of them (North Air and West Air) are airline stocks and one (Tex Oil) is an
Annual returns of three stocks are given below. Two of them (North Air and West Air) are airline stocks and one (Tex Oil) is an oil stock. In general, when oil prices go up, airline company stocks go down and oil company stocks go up.
YEAR | NORTH AIR | WEST AIR | TEX OIL |
2015 | -28% | 9% | -2% |
2016 | 30% | -28% | -5% |
2017 | 7% | 7% | 9% |
2018 | -5% | -2% | -28% |
2019 | -2% | -5% | 30% |
2020 | 9% | 30% | 7% |
Create a porfolio (to diversify risk) by mixing 50% of North Air and 50% Tex Oil stocks.
How much is the portfolio's risk (i.e., annual standard deviation)? Notice that risk goes down in a portfolio. Enter your answer in the following format: 0.1234 Hint: Use finance calculator. Do not enter answer as 12.34, enter it as 0.1234. Answer is between 0.1232 and 0.1494
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