Suppose that there are 3 stocks available
and you want to invest in 2 of them to generate your little
portfolio. Stock A is McDonalds. Stock B is Burger King. Stock C is
a company selling healthy veggie food. With the goal of reducing
risk in your portfolio, which combinations of two stocks is the
WORST choice? Group of answer choices Combining stock B and stock
C. Combining stock A and stock B. Combining stock A and stock
C.
Homework Answers
Combining Stock A and Stock B
McDonalds and Burger king both sell similar products thus their correlation of expected return must be near perfectly positive correlated i.e +1, which means both stock prices go up or down together.
A positive correlated stocks have no diversification benefits thus they are worst choice to reduce risk of portfolio.
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
Add Answer to:
Suppose that there are 3 stocks available
and you want to invest in 2 of them...
Suppose that there are 3 stocks available and you want to invest in 2 of them...
Suppose that there are 3 stocks available
and you want to invest in 2 of them to generate your little
portfolio. Stock A is McDonalds. Stock B is Burger King. Stock C is
a company selling healthy veggie food. With the goal of reducing
risk in your portfolio, which combinations of two stocks is the
WORST choice? Group of answer choices Combining stock B and stock
C. Combining stock A and stock B. Combining stock A and stock
C.
Question...
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Suppose that there are 3 stocks available
and you want to invest in 2 of them to generate your little
portfolio. Stock A is McDonalds. Stock B is Burger King. Stock C is
a company selling healthy veggie food. With the goal of reducing
risk in your portfolio, which combinations of two stocks is the
WORST choice? Group of answer choices Combining stock B and stock
C. Combining stock A and stock B. Combining stock A and stock
C.
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