Stocks A, B C have the same expected return and standard deviation The correlations between the returns of these stocks are shown in the table below Stock A Stock B Stock C Stock A 1 0 Stock B 0 87 1 0 Stock C 0 16 0 42 1 0 Given these correlations, the portfolio constructed from these stocks having the lowest risk is a portfolio a Equally invested in stocks A B b Equally invested in stocks A C c Equally invested in stocks B C d Totally invested in stock C Explain your answer

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Question: Stocks A, B & C have the same expected return and standard deviation. The correlations between the returns of these stocks are shown in the

Stocks A, B & C have the same expected return and standard deviation. The correlations between the returns of these stocks are shown in the table below.

	Stock A	Stock B	Stock C
Stock A	+1.0
Stock B	+0.87	+1.0
Stock C	+0.16	-0.42	+1.0

Given these correlations, the portfolio constructed from these stocks having the lowest risk is a portfolio:

a. Equally invested in stocks A & B

b. Equally invested in stocks A & C

c. Equally invested in stocks B & C

d. Totally invested in stock C

Explain your answer

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