e Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average rotum and standard deviation for each stock appears here: a. If the returns of assets Alpha and Beta are perfectly positively correlated (correlation coefficient = + 1), over what range would the average return on portfolios of these stocks vary? In other words, what is the highest and lowont average retum that different combinations of these stocks could achieve? What is the minimum and maximum standard deviation that portfolios Alpha and Beta could achieve? pl b. If the returns of assets Alpha and Beta are uncorrelated (correlation coefficient = 0) over what range would the average return on portfolios of these stocks vary What is the standard deviation of a portfolio that investe 75% in Alpha and 25% in Bota? How does this compare to the standard deviations of Alpha and Betaalone? o. If the returns of amets Alpha and Bets are perfectly negatively correlated (correlation coefficient-1), over what range would the average return on portfolios of these stocks vary? Calculate the standard deviation of a portfolio that invests 62 6% in Alpha and 37.6% in Beta by a. If the return of assets Alpha and Bets are perfectly positively correlated (correlation coefficient + 1) the range is ast between % and [% (Round to one decimal place) uin in the range of the standard deviation is between and L) (Round to one decimal place) bs. If the returns of assets Alpha and Beta are uncorrelated (correlation coefficient -o the range le between Band (Round to one decimal place) You The standard deviation of a portfolio that invests 76% in Aptus and 25% in Beta a I. (Round to two decimal places) the return of anots Alpha and Beta we perfectly negatively correlated correlation coefficient, the range lubetween and I (Round to one decimal place) The standard deviation of a portfolio that inventa 62.5% in Aphapha and 37% in Beta Round to wo decimal piace) Enter your answer in each of the answer boxes Derfect positive, uncorrelated, and perfect negative. The average return and standard deviation for e and Beta are perfectly positively correlated (correlation coefficient = + 1), over what range would the Es, what is the highest and lowest average return that different combinations of these stocks could ac at portfolios Alpha and Beta could achieve? and Beta are uncorrelated (correlation coefficient = 0), over what range would the average return on of a portfolio that invests 75% in Alpha and 25% in Beta? How does this compare to the standard devi and The e star Data Table and nd to (Click on the icon here in order to copy its contents of the data table below into iation a spreadsheet.) na and Ind to Asset Alpha Beta Average Return, 6.9% 10.3% Risk (Standard Deviation), s 29.8% 50.4% ortfolio ha and % ar Print Done portfolio
