Question: Statistics for three stocks A, B & C are shown in the following tables: Stock A Stock B Stock C Standard Deviation 40% 20% 40%

Statistics for three stocks A, B & C are shown in the following tables:

	Stock A	Stock B	Stock C
Standard Deviation	40%	20%	40%

Correlations of Returns:

Stock	A	B	C
A	1.00	0.91	0.53
B		1.00	0.12
C			1.00

Only on the basis of the information provided in the tables and given the choice between a portfolio made up of equal amounts of stocks A and B or a portfolio made up of equal amounts of stocks B & C, which portfolio would you recommend? SHOW CORRELATION OF RERETURN?Justify your answer.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

1.Statistics for three stocks A, B & C are shown in the following tables: Standard Deviation Return Stock A 40% 15% Stock B 20% 10% Stock C 40% 15% Correlation of Returns A 1.00 Stock A B B 0.32 1.00...

Statistics for three stocks, A, B, and C, are shown in the following tables. Asset: ABC Standard Deviation 40% 20% 40% Table 1: Standard deviation of returns Asset: A B C 1.00 0.90 0.50 0.90 1.00...

Statistics for three stocks, A, B, and C, are shown in the following tables. Asset: ABC Standard Deviation 40% 20% 40% Table 1: Standard deviation of returns Asset: A BC 1.00 0.90 0.50 0.90 1.00 0.10...

Canvas Statistics for three assets A, B & C are shown in the following tables Asset Table Asset A Asset B Asset C Standard Deviation 30% 15% 30% Return 22 % 10% 22 % Correlation of Returns Asset A C...

Statistics for three assets A, B & C are shown in the following tables: Asset Table Asset A Asset B Asset C Standard Deviation 20% 10% 20% Return 10% 7% 10% Correlation of Returns Asset A B C A 1.00...

Statistics for three assets A B C are shown in the following tables: Asset A Asset B Asset C Standard deviation 20% 10% 20% Return 10% 7% 10% Condition of returns Asset A B C A 1.00 -0.81 0.50 B 1.00...

Statistics for three assets A, B & C are shown in the following tables: Asset Table Asset A Asset B Asset C Standard Deviation 20% 12% 20% Return 10% 7% 10% Correlation of Returns Asset A B C A 1.00...

The correlation between the returns of three stocks A, B, C are given in the following tables: A B C D 1 STOCK A B C 2 A 1.00 0.8 0.10 3 B 1.00 0.15 4 C 1.00 The expected rates of returns on A, B,...

The correlation between the returns of three stocks A, B, C are given in the following tables: The expected rates of returns on A, B, and C are 16%, 12%, and 15% respectively. The corresponding...

**PLEASE COMPLETE IN EXCEL & SHOW FORMULA'S** The correlation between the returns of three stocks A, B, C are given in the following tables: A Stock A B B A 1.00 1 2 3 4 B 0.80 1.00 D 0.10 0.15 1.00...

Researchers studying pleasant touch sensations measured the firing frequency (impulses per second) of nerves that were stimulated by a light brushing stroke on the forearm and also recorded the...

Assume that Montoya Co. uses the net method to account for cash discounts. On June 1, 2007, it made sales of $40,000 with terms 3/15, n/45. On June 12, 2007, Montoya received full payment for the...

in a new exhibit. Amusement parks need to rotate exhibits to keep people interested. Additional information concerning the potential investment follows. the field in which the cash flow for the...

John Smith has an equal amount invested in each of the following four securities: Security : K T Z G Expected Annual Rate of Return : 0.13 0.23 0.35 0.22 a.John plans to sell security Z and use the...