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You have a portfolio with a standard deviation of 21% and an expected return of 16%. You are considering adding one of the two stocks
You have a portfolio with a standard deviation of 21% and an expected return of 16%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20% of your money in the new stock and 80% of your money in your existing portfolio, which one should you add?
Expected Return | Standard Deviation | Correlation with Your Portfolio's Returns | |
Stock A | 12% | 25% | 0.2 |
Stock B | 12% | 17% | 0.5 |
What is the Standard deviation of the portfolio with stock A?
What is the Standard deviation of the portfolio with stock B?
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