You have a portfolio with a standard deviation of 20% and an expected return of 20%.
You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20% of your money in the new stock and 80% of your money in your existing portfolio, which one should you add?
Expected Return |
Standard Deviation |
Correlation with Your Portfolio's Returns |
|
Stock A |
15% |
22% |
0.4 |
Stock B |
15% |
18% |
0.6 |
Standard deviation of the portfolio with stock A is? (Round to two decimal places.)
Please show steps taken to reach answers.
Standard deviation of the portfolio with stock A = 18.21%
Standard deviation of the portfolio with stock B= 18.38%
Stock A should be added because the Standard deviation of the portfolio with stock A is less than the Standard deviation of the portfolio with stock B.
You have a portfolio with a standard deviation of 20% and an expected return of 20%....
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