Question: The average return on stock A is 11% per year, while the average return on stock B is 15.5% per year. The standard deviation of

The average return on stock A is 11% per year, while the average return on stock B is 15.5% per year. The standard deviation of returns on stock A is 3%, while the standard deviation of returns on stock B is 4.5%. The covariance between A's returns and B's returns is 0.00135. Will there be a diversification effect from combining stocks A and B in a portfolio? How do you know?

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