Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results:

R_HD =0.02+0.80R_M+e_HD

R-squared =0.6

R_ML =-0.03+1.50R_M+e_ML

R-squared =0.4

?_M =0.20

where M is S&P/TSX Comp Index, R_X is the excess return of stock X.

What is the standard deviation of each stock?

What is the systematic risk of each stock?

What are the covariance and correlation coefficient between HD and ML?

For portfolio P with investment proportion of 0.3 in HD and 0.7 in ML, calculate the systematic risk, non-systematic risk and total risk of P.