A Stock Portfolio Consists of Two Stocks X and Y

question 26

Multiple Choice

A stock portfolio consists of two stocks X and Y. Their daily closing prices are correlated random variables with variances σ_X² = 3.51 and σ_Y² = 5.22, and covariance σ_XY = -1.55. What is the standard deviation of the sum of the closing prices of these two stocks?

• A)5.63
• B)7.18
• C)8.73
• D)2.68

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Definitions:

Global Market

An interconnected marketplace without geographical limits where goods, services, and capital move freely.

Multinational

A corporation that operates in multiple countries, managing production or delivering services in more than one country.

World Economic Forum

An international organization that brings together political, business, and other leaders to shape global, regional, and industry agendas.

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A term referring to the global elite of wealthy and powerful individuals who are believed to attend the World Economic Forum in Davos, Switzerland, impacting global policies.