Returns to Coca-Cola and Pepsi are closely correlated, given that they belong to the same industry, facing similar costs, producing similar products, and selling to similar consumers. Your analysis shows that the returns have a correlation coefficient = .95. Including both Coca-Cola stock and Pepsi stock in your portfolio will

(a) Not be able to reduce the risk of your portfolio, since a loss for Coca-Cola is likely to be compounded with a loss for Pepsi.

(b) Not be able to reduce the risk of your portfolio, because even if Coca-Cola has a good return, theres a small chance of Pepsi having a negative return.

(c) Be able to reduce the risk of your portfolio, but only because the returns are not perfectly correlated.

(d) Be able to reduce the risk of your portfolio, since adding extra securities always reduces variance of a portfolio.