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You invest 45% of your money in Stock Y and the rest in Stock Z. The standard deviation of Stock Y's annual returns is 57%
You invest 45% of your money in Stock Y and the rest in Stock Z. The standard deviation of Stock Y's annual returns is 57% and the standard deviation of Stock Z's annual returns is 45%. The return correlation between the two stocks is -1.0. By how many percentage points did diversification reduce your risk in this case? Write your answer out to three decimals - for example, write 6.2% as .062.
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