Question
Stock X has 32% standard deviation of return. Stock Y has 32% standard deviation of return. The correlation between the returns of the two
Stock X has 32% standard deviation of return. Stock Y has 32% standard deviation of return. The correlation between the returns of the two stocks is 64%. Buck's portfolio consists of equal investments in X and Y. Buck's friend Slim holds a portfolio equally composed of stocks A and B, which each have 64% standard deviation of return. For what return correlation between A and B would the standard deviation of Slim's portfolio return match that of Buck's? Report your answer as a percentage correct to two digits after the decimal place." The return correlation between A and B would have to be%.
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Financial Modeling
Authors: Simon Benninga
4th Edition
0262027283, 9780262027281
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