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Consider a mutual fund that is currently investing only in Toyota Motor Corporations stock (Ticker: TM). The fund manager has collected information of another three stocks. The fund manager wants to combine TM with another stock and reduce the portfolios risk using diversification. Which stock (among F, HPQ and XOM) would you recommend?

A. F

B. HPQ

C. XOM

Expected return and standard deviation F HPQ XOM TM 16.9% 25% 82.70% Expected Return Standard Deviation 8.24% 9.08% 61.74% 146.68% 13.20% Covariance Matrix TM F LHPQ XOM TM F 0.1140 HPQ 0.0640 -0.0129 0.3044 -0.1762 XOM 0.0008 HPQ | XOM Correlation Matrix TM TMT F 0.3110 HPQ 0.4147 XOM -0.3914 0.3361 -0.9098 0.0095 Expected return and standard deviation F HPQ XOM TM 16.9% 25% 82.70% Expected Return Standard Deviation 8.24% 9.08% 61.74% 146.68% 13.20% Covariance Matrix TM F LHPQ XOM TM F 0.1140 HPQ 0.0640 -0.0129 0.3044 -0.1762 XOM 0.0008 HPQ | XOM Correlation Matrix TM TMT F 0.3110 HPQ 0.4147 XOM -0.3914 0.3361 -0.9098 0.0095