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Question 1. Let X and Y be prices of two stocks. Consider the position of an investor who owns one share each: Z=X+Y. Which of

Question 1. Let X and Y be prices of two stocks. Consider the position of an investor who owns one share each: Z=X+Y. Which of the three cases has the smallest variance?

1. Cov(X,Y)>0

2. Cov(X,Y)=0

3. Cov(X,Y)<0

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