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 |
||
|
Stock B |
0.9 |
1 |
|
|
Stock C |
0.1 |
0.4 |
1 |
Given these correlations, which of the following portfolios constructed from these stocks would have the lowest risk? (1994 CFA Exam)
a. equally invested in stocks A and B
b. equally invested in stocks A and C
c. equally invested in stocks B and C
d. totally invested in stock C