Question
Review the example from the lecture about Umbrella Inc and Sunscreen Inc. Both companies have 10% return & 45% volatility and are perfectly negatively correlated.
Review the example from the lecture about Umbrella Inc and Sunscreen Inc. Both companies have 10% return & 45% volatility and are perfectly negatively correlated.
The risk of each stock (Sunscreen or Umbrella) by ITSELF is the its standard deviation, which is this example is 45%.
What is the measure of each stocks contribution to risk when held together in a portfolio? (Hint: the risk of a portfolio comprising equal proportions of Sunscreen & Umbrella is zero. Yet the risk of each stock by itself is 45%). (10 pts)
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Handbook Of Energy Finance Theories Practices And Simulations
Authors: Stéphane Goutte, Duc Khuong Nguyen
1st Edition
9813278374, 978-9813278370
