Question
Based on your research, you have already invested 20% of your savings in Stock X, which has a standard deviation of returns of 0.70. You
Based on your research, you have already invested 20% of your savings in Stock X, which has a standard deviation of returns of 0.70. You want to diversify your risk and invest the remaining of your savings in one of the two other stocks based on your research: Stock A or Stock B. Standard deviation of the returns for Stock A is 0.83. The covariance of the returns between Stock X and A is 0.75. Whereas returns for Stock B have a standard deviation of 0.91. The covariance of the returns between Stock X and B is 0.61. To diversify, you should invest in _________ and build a two-asset portfolio with Stock X, achieving a variance of __________.
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