u observe the following information regarding Company ABC and Company XYZ: ·     Company ABC has a higher expected mean return than Company XYZ. ·     Company ABC has a lower standard deviation than Company XYZ. ·     Company ABC has a higher beta than Company XYZ. Given this information, which of the following statements is most correct?     Company ABC has more company-specific risk than Company XYZ. Company ABC has a lower coefficient of variation than Company XYZ. Company ABC is a better stock to buy than Company XYZ. Both companies has equal risk

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.