Question: Statistics or three stocks A, B, and C are shown below standard of deviation of returns StockStandard Deviation (%) A B C 40 20 40

Statistics or three stocks A, B, and C are shown below

standard of deviation of returns

StockStandard Deviation (%) A B C
40 20 40

Correlation of Returs:

Correlation of A & B = 0.90

Correlation of A & C = 0.50

Correlation of B & C = 0.10

Using only the information on the tables, and given a choice between a portfolio made up of equal amounts of stocks A & B or a portfolio made up of equal amount of B & C, which portfolio would you recommend? Justify your answer.

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