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Statistics for three stocks, A, B and C, are shown in the following tables: Standard Deviation of Returns Stock A B C Standard Deviation (%)
Statistics for three stocks, A, B and C, are shown in the following tables:
Standard Deviation of Returns | |||
Stock | A | B | C |
Standard Deviation (%) | 40 | 20 | 40 |
Correlations of Returns | |||
Stock | A | B | C |
A B C | 1 | 0.90 1 | 0.50 0.10 1.00 |
Only on the basis of the information provided in the tables, and given a choice between a portfolio made up of equal amounts of stocks A and B or a portfolio made up of equal amounts of stocks B and C, which portfolio would you recommend? Show calculations for your choice.
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