Minimum Variance Portfolio Stocks A, B, and C each have the same expected return and standard deviation. The following shows the correlations between returns on these stocks:
|
Stock A |
Stock B |
Stock C |
|
|
Stock A |
+1.0 |
||
|
Stock B |
+0.9 |
+1.0 |
|
|
Stock C |
+0.1 |
0.4 |
+1.0 |
Given these correlations, which of the following portfolios constructed from these stocks would have the lowest risk?
a. One equally invested in stocks A and B.
b. One equally invested in stocks A and C.
c. One equally invested in stocks B and C.
d. One totally invested in stock C.