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One stock has standard deviation of returns of 20%, and another stock has standard deviation of returns of 30%. The correlation between their returns is
One stock has standard deviation of returns of 20%, and another stock has standard deviation of returns of 30%. The correlation between their returns is 50%. How would you allocate money between these two stocks so as to minimize your risk? How would your answer change if the variances of the returns of the two stocks were 10% and 40% respectively, and the correlation was 50%?
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