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Stocks A, B, and C have the same expected return and standard deviation. The correlations between the returns on these stocks are shown in the
Stocks A, B, and C have the same expected return and standard deviation. The correlations between the returns on these stocks are shown in the following table:
|
Stock |
Stock A |
Stock B |
Stock C |
|
Stock A |
+1.0 |
|
|
|
Stock B |
+0.9 |
+1.0 |
|
|
Stock C |
+0.1 |
-0.4 |
+1.0 |
Given these correlations, the portfolio constructed from these stocks having the lowest risk is a portfolio:
| A. | Equally invested in stocks A and B.
| |
| B. | Equally invested in stocks A and C.
| |
| C. | Equally invested in stocks B and C
| |
| D. | Totally invested in Stock C. |
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