Question
The standard deviation of annual returns is 44.6% for Stock #1 and 59.1% for Stock #2. The correlation of Stock #1's returns to Stock #2's
The standard deviation of annual returns is 44.6% for Stock #1 and 59.1% for Stock #2. The correlation of Stock #1's returns to Stock #2's returns is +1. You want to create a hedged, net-long portfolio. Which of the choices below will accomplish that goal?
Select one:
Buy $446 of Stock #1 and buy $591 of Stock #2
Buy $446 of Stock #1 and sell $591 of Stock #2
Sell $446 of Stock #1 and buy $591 of Stock #2
Sell $446 of Stock #1 and sell $591 of Stock #2
Buy $591 of Stock #1 and buy $446 of Stock #2
Buy $591 of Stock #1 and sell $446 of Stock #2
Sell $591 of Stock #1 and buy $446 of Stock #2
Sell $591 of Stock #1 and sell $446 of Stock #2
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