Use the following expectations on stocks X and Y to answer the questions below: Bear Market Normal
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Question:
Use the following expectations on stocks X and Y to answer the questions below:
Bear Market | Normal Market | Bull Market | |
Probability | 0.2 | 0.5 | 0.3 |
Stock X | -20% | 18% | 50% |
Stock Y | -15% | 20% | 10% |
- The correlation between stock X and Y is 0.4.
- What is the expected return for each stock?
- What is the standard deviation for each stock?
- Assume you invest your $100,000 in a portfolio with $90,000 in stock X and $10,000 in stock Y. What are the expected return and standard deviation of your portfolio?
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