Stocks A, B, and C have the same expected return and standard deviation. The following table shows the correlation between the returns on these stocks.   Stock A Stock B Stock C Stock A +1.0     Stock B +0.9 +1.0   Stock C +0.1 -0.4 +1.0

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Stocks A, B, and C have the same expected return and standard deviation. The following table shows the correlation between the returns on these stocks.

 

Stock A

Stock B

Stock C

Stock A

+1.0

   

Stock B

+0.9

+1.0

 

Stock C

+0.1

-0.4

+1.0

Given these correlations, the portfolio constructed from these stocks having the lowest risk is a portfolio:

  1. Equally invested in stocks A and B.
  2. Equally invested in stocks A and C.
  3. Equally invested in stocks B and C.
  4. Totally invested in stock C.
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