Question $2(20$ marks$)$

An investor, Adam, currently holds his entire investment in the stock of Novo Corporation $($Ticker: N $),$ which he perceives as having very low risk. His financial advisor, Judy, concurs that Novo stock is relatively stable but wishes to demonstrate the potential risk$-$reduction benefits of diversification.

Judy has gathered the following historical annual return data for Novo Corporation $($N$)$ and another stock, Gemini Inc. $($Ticker: G$),$ over the last five years. Both stocks have exhibited less return variability than the overall market during this period. Judy proposes that Adam construct a portfolio consisting of $60\%$ invested in Novo Corporation $($N$)$ and the remaining $40\%$ in Gemini Inc. $($G$).$

$\backslash$table$[[$Year$,$Return for N$,$Return for G$],[2020,18\mathrm{.}00\%,9\mathrm{.}00\%$