In: Finance
You have a portfolio with a standard deviation of 21% and an expected return of 16%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20% of your money in the new stock and 80% of your money in your existing portfolio, which one should you add?
Expected Return |
Standard Deviation |
Correlation with Your Portfolio's Returns |
|
Stock A |
12% |
25% |
0.2 |
Stock B |
12% |
17% |
0.5 |
What is the Standard deviation of the portfolio with stock A?
What is the Standard deviation of the portfolio with stock B?
Calculations-
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