Jack Jones has a two-stock portfolio with 50% invested in Stock A. The variance of Stock A is 0.13 and the standard deviation of Stock B is 22%. The covariance between Stock A and Stock B is 0.1.

1)Calculate the correlation between the two stocks. (4 Marks) Please provide your answer to 6 decimal places.

2) Mike Menzes has a portfolio made up of 2 different stocks. He decides to increase his portfolio size by purchasing more of these stocks. He decides to purchase enough stocks to double his portfolio size but at the same time, maintain his overall portfolio weighting between the two stocks. What is the expected impact of his decision on the variance of his portfolio return?

a) increase in portfolio variance

b) decrease in portfolio variance

c) no change in in portfolio variance

d) cannot be determined