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Arbor Systems and Gencore stocks both have a volatility of 40%. Compute the volatility of a portfolio with 50% invested in each stock if the
Arbor Systems and Gencore stocks both have a volatility of 40%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) + 1, (b) 0.50, (c) 0, (d) 0.50, and (e) 1.0. In which cases is the volatility lower than that of the original stocks?
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