# Question: You currently hold a portfolio of three stocks Delta Gamma

You currently hold a portfolio of three stocks, Delta, Gamma, and Omega. Delta has a volatility of 60%, Gamma has a volatility of 30%, and Omega has a volatility of 20%. Suppose you invest 50% of your money in Delta, and 25% each in Gamma and Omega.

a. What is the highest possible volatility of your portfolio?

b. If your portfolio has the volatility in (a), what can you conclude about the correlation between Delta and Omega?

a. What is the highest possible volatility of your portfolio?

b. If your portfolio has the volatility in (a), what can you conclude about the correlation between Delta and Omega?

**View Solution:**## Answer to relevant Questions

Suppose Ford Motor stock has an expected return of 20% and a volatility of 40%, and Molson Coors Brewing has an expected return of 10% and a volatility of 30%. If the two stocks are uncorrelated,a. What is the expected ...A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle’s and Intel’s returns is 0.65. The ...Returning to Problem 38, assume you follow your broker’s advice and put 50% of your money in the venture fund.a. What is the Sharpe ratio of the Tanglewood Fund?b. What is the Sharpe ratio of your new portfolio?c. What is ...During the recession in mid-2009, homebuilder KB Home had outstanding 6-year bonds with a yield to maturity of 8.5% and a BB rating. If corresponding risk-free rates were 3%, and the market risk premium was 5%, estimate the ...Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers but it does ...Post your question