Question
Suppose that your job is to hire portfolio managers and let each one of them run his own investment strategy independently. Unfortunately, you know little
Suppose that your job is to hire portfolio managers and let each one of them run his own investment strategy independently. Unfortunately, you know little about these managers, and have no better guess than to assume that the monthly returns that each one will generate are distributed with a mean of 1% and a standard deviation of 9%. After hearing descriptions of their strategies, you believe that it is reasonable to assume that the returns on their assets will be uncorrelated.
What is the correlation of the return on the 50/50 portfolio with the return of manager 1?
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