Consider two similar stocks, S1 and S2. Both have averaged 10% annual return, and their risks in

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Consider two similar stocks, S1 and S2. Both have averaged 10%

annual return, and their risks in terms of standard deviations (STD)

are also the same at 20%. The correlation coefficient between the two stocks is 0.1. Prove that, by investing equal amount of money in S1 and S2, the portfolio risk can be reduced as compared to investing all the funds in either S1 or S2 alone.

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Service Systems Engineering And Management

ISBN: 978-0367781323

1st Edition

Authors: A. Ravi Ravindran ,Paul M. Griffin ,Vittaldas V. Prabhu

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Question Posted: Feb 27, 2024 03:11 AM

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Consider two similar stocks, S1 and S2. Both have averaged 10% annual return, and their risks in

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Service Systems Engineering And Management

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