The following figure shows plots of monthly rates of return and the stock market for two stocks.

Question:

a. Which stock is riskier to an investor currently holding her portfolio in a diversified portfolio of common stock?

b. Which stock is riskier to an undiversified investor who puts all of his funds in only one of these stocks?

The following figure shows plots of monthly rates of return

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...