Question: Consider two high-risk stocks, X and Y. The expected return on stock Y is 16%, with a standard deviation of 13%. The expected return on

Consider two high-risk stocks, X and Y. The expected return on stock Y is 16%, with a standard deviation of 13%. The expected return on stock X is 20%, with a standard deviation of 25%.

The correlation between the returns of X and Y is + 0.3.

Does the formation of a portfolio bring the benefits of diversification?

Use calculations to support your conclusion

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