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Samuel's friend tells him that it is not wise to invest his money in stocks that have such a high positive correlation. Help Samuel by
Samuel's friend tells him that it is not wise to invest his money in stocks that have such a high positive correlation.
Help Samuel by
(i) making him understand what correlation is and how the correlation between two stocks influences the overall risk and return of the two asset portfolio.
(ii) Suggesting how Samuel can invest his money more wisely by considering both the correlation between the stocks and the level of systematic and unsystematic risk to which he is exposed.
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