Garbor and Encore stocks both have a volatility (i.e., standard deviation) of 40%.  Calculate the volatility of a portfolio with...

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Garbor and Encore stocks both have a volatility (i.e., standard deviation) of 40%.  Calculate the volatility of a portfolio with 50% invested in each stock if the correlation between the two stocks is a) +1, b) 0.50, c) 0, d) -0.50, and e) -1.  In which cases is the volatility lower than that of the each original stock?

    • 13 years ago
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