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mauveant422Lv1
28 Sep 2019
The variance for Steady Corpâs stock is 3.6%; the variance for Techie Corpâs stock is 14.4%. Whatâs the variance for a portfolio of (25%, 75%) of these two stocks, if the correlation coefficient between the two stocksâ returns is 0?
4.5%
10.2%
9%
8.3%
How would your answer to the last question change if the correlation coefficient increases?
Variance of the portfolio increases as the correlation between the stocks increases, which means a larger degree of diversification.
Variance of the portfolio increases as the correlation between the stocks declines, which means a larger degree of diversification.
Variance of the portfolio increases as the correlation between the stocks increases, which means less diversification.
Variance of the portfolio increases as the correlation between the stocks declines, which means less diversification.
The variance for Steady Corpâs stock is 3.6%; the variance for Techie Corpâs stock is 14.4%. Whatâs the variance for a portfolio of (25%, 75%) of these two stocks, if the correlation coefficient between the two stocksâ returns is 0?
4.5% |
10.2% |
9% |
8.3% |
How would your answer to the last question change if the correlation coefficient increases?
Variance of the portfolio increases as the correlation between the stocks increases, which means a larger degree of diversification. |
Variance of the portfolio increases as the correlation between the stocks declines, which means a larger degree of diversification. |
Variance of the portfolio increases as the correlation between the stocks increases, which means less diversification. |
Variance of the portfolio increases as the correlation between the stocks declines, which means less diversification. |
Trinidad TremblayLv2
28 Sep 2019