You currently have one stock in your investment portfolio. It is APT. You are considering adding one more stock to your portfolio so that your portfolio has a 50% weight in APT and a 50% weight in the other stock. You can add CBA, ANZ or NAB. You expect CBA, ANZ and NAB to each provide a return of 5% over the next 12 months. The correlation between APT and CBA is 0.5. The correlation between APT and ANZ is 0.45. The correlation between APT and NAB is 0.4. Which stock would you combine with APT to provide the lowest portfolio risk?

a.

ANZ

b.

Unsure, more information is required.

c.

CBA

d.

NAB