See Chapter 8 Exercise 2. Suppose your portfolio mixes Stock A and Stock B half and half. (1) What is the sigma of your portfolio if their correlation is positive 0.3? (2) What is the sigma of your portfolio if their correlation is negative 0.3? Compute the two correlations and report the smaller one. DEME VE COLUMLUUS OI UIC IWO STOCKS. 2. Consider the two stocks below. Graph the frontier of combinations of the two stocks. Show the effect on the frontier of varying the correlation from -1 to +1. F 1 2 3 Mean 4 Sigma 5 Correlation B D E TWO STOCKS Varying the correlation coefficient Stock A Stock B 3.00% 8.00% 15.00% 22.00% 0.3000