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Business, 02.11.2019 04:31 AshIeigh

Highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. the three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. potential new stocks a and b both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r = 0.75. however, stock a's standard deviation of returns is 12% versus 8% for stock b. which stock should this investor add to his or her portfolio, or does the choice not matter?

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