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You expect UCL stock to have a 12% return next year and a 30% volatility. You have $5,000 to invest, but plan to invest a
- You expect UCL stock to have a 12% return next year and a 30% volatility. You have $5,000 to invest, but plan to invest a total of $20,000 in UCL, raising the additional $15,000 by shorting either TAB or TLS stock. Both TAB and TLS have an expected return of 10% and a volatility of 20%. If TAB has a correlation of 0.5 with UCL, and TLS has a correlation of 0.50 with UCL. Use calculations to show which stock you should short in order to minimize your investment risk.
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