Stock a Has a Daily Volatility of 1

question 2

Short Answer

Stock A has a daily volatility of 1.2% and stock B has a daily volatility of 1.8%. The correlation between the two stock price returns is 0.2.
i) What is the standard deviation of the return from stock A over 4 days? _ _ _ _ _ _
ii) What is the standard deviation of the return from stock B over 4 days? _ _ _ _ _ _
iii) What is the standard deviation to the nearest $'000) of the 4-day change in the value of a portfolio consisting of a $1 million investment in stock A and a $1 million investment in stock B? _ _ _ _ _ _

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Definitions:

Negative Mood

Negative mood refers to a temporary state of feeling sad, anxious, irritable, or generally unhappy, affecting one's thoughts, perceptions, and behavior.

Anxiety to Novelty

The feeling of unease or nervousness experienced by an individual when faced with new or unfamiliar situations.

Temperament Dimensions

Fundamental personality traits often present from birth, influencing how individuals respond to their environment.

Inhibited

Refers to a state or condition in which an individual restrains or holds back expressions, impulses, or actions, often due to anxiety or social convention.