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Statistics for three stocks A, B & C are shown in the following tables: Stock A Stock B Stock C Standard Deviation 40% 20% 40%

Statistics for three stocks A, B & C are shown in the following tables:

Stock A

Stock B

Stock C

Standard Deviation

40%

20%

40%

Correlations of Returns:

Stock

A

B

C

A

1.00

0.91

0.53

B

1.00

0.12

C

1.00

Only on the basis of the information provided in the tables and given the 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 & C, which portfolio would you recommend? SHOW CORRELATION OF RERETURN?Justify your answer.

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