You are a portfolio manager building a low$-$risk portfolio. Two of your analysts are arguing over whether the portfolio should include shares in Intelsat, the satellite manufacturer. Which of the following of the analysts$$ arguments is correct?

Responses

The stock should be included, because it is low risk. The event of a launch failure is uncorrelated with the risks affecting the other stocks in the portfolio.

The stock should not be included because it is too risky. It has a very high standard deviation of returns, because if a rocket launch fails, then the company loses a satellite worth more than $$250$ million.