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You are expected to explain diversification effect by using an example of a two-stock portfolio (stock A and Stock B) to show holding the portfolio
You are expected to explain diversification effect by using an example of a two-stock portfolio (stock A and Stock B) to show holding the portfolio will bring benefit to investors than holding the two stocks individually. Please create the two stocks with your own values of return and standard deviation of each stock and the correlation coefficient between the two. Clarify your initial inputs, demonstrate your calculations, and explain what your example indicates about diversification.
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