Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Annual returns of three stocks are given below. Two of them (Air America and Air Brazil) are airline stocks and one (Star Oil) is an
Annual returns of three stocks are given below. Two of them (Air America and Air Brazil) are airline stocks and one (Star Oil) is an oil stock. In general, when oil prices go up, airline company stocks go down and oil company stocks go up.
YEAR | Air America | Air Brazil | Star Oil |
2016 | -28% | 9% | -2% |
2017 | 30% | -28% | -5% |
2018 | 7% | 7% | 9% |
2019 | -5% | -2% | -28% |
2020 | -2% | -5% | 30% |
2021 | 9% | 30% | 7% |
Create a porfolio (to diversify risk) by mixing 50% of Air America and 50% of Star 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: Answer is between 0.1232 and 0.1550
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started