Please pick one answer choice.Regarding the formula: ${}_{R_{2\text{A}\text{s}\text{s}\text{e}\text{t}\text{P}\text{o}\text{r}\text{t}\text{f}\text{o}\text{l}\text{i}\text{o}}^2}^2=x_1^2{}_{R_1}^2+x_2^2{}_{R_2}^2+2x_1{x}_2{}_{R_{1,2}}$

What is this formula explaining to us regarding the risk of a portfolio with more than on asset?

One must take into account the variation in each stock but also the variation of how each stock interacts

together.

The variation in the returns from a portfolio that consists of stocks in equal proportions is more than the

variation in the returns from either of those stocks alone

The variation in the returns from a portfolio that consists of stocks in equal proportions cancels each

other so that the returns are consistent

The variation in the returns from a portfolio that consists o$.$ stocks in equal proportions is less than the

variation in the returns from either of those stocks alone