In: Finance
Here are some historical data on the risk characteristics of Ford and Harley Davidson.
Ford Harley Davidson
Beta 1.36 0.87
Annual Standard Deviation of return (%)32.4 16.2
a) The correlation coefficient of Ford’s return versus Harley Davidson is 0.41. What is the standard deviation of a portfolio invested half in each share?
b) What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills?