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Assume ABC Are All Positively Correlated

question 9

Essay

Assume ABC are all positively correlated.A fourth stock is being considered for addition to the portfolio,either stock D or stock E.Both D and E have expected returns of 12%.If stock D is positively correlated with ABC and E is negatively correlated with ABC,which stock should be added to the portfolio? Why?


Definitions:

Derate

To reduce the rated capability of electronic components or electrical devices due to environmental conditions or other factors.

Ambient Temperature

The temperature of the surrounding environment where a device operates or a process occurs.

Raceway

An enclosed conduit that forms a physical pathway for electrical wiring to be protected and routed through a building or structure.

Ambient Temperature

The temperature of the air or environment surrounding a device or circuit.

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