Question: Arbor Systems and Gencore stocks both have a volatility of

Arbor Systems and Gencore stocks both have a volatility of 40%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is
(a) +1,
(b) 0.50,
(c) 0,
(d) -0.50, and
(e) -1.0.
In which cases is the volatility lower than that of the original stocks?


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  • CreatedAugust 06, 2014
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