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PLEASE ITS URGENT,PLEASE ITS URGENT,PLEASE ITS URGENT Let us say you can find many stocks...

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Finance

PLEASE ITS URGENT,PLEASE ITS URGENT,PLEASE ITS URGENT

Let us say you can find many stocks with all the stocks having the same standard deviation of the returns. You made multiple portfolios with these stocks making sure that all the stocks within a portfolio have same pairwise correlation between their returns. Across portfolios, the pairwise correlation between their returns might be different. Moreover, in every portfolio you decided to invest in the stocks in an equal proportion. If the portfolios are such that Portfolio 1 has lower pairwise correlation that Portfolio 2, Portfolio 2 has lower pairwise correlation that Portfolio 3 and so on. What can you say about the variance of these Portfolios? (Assume that correlations in all portfolios are positive and that all portfolios have same number of stocks in them)

A Variance will remain the same when we go from Portfolio 1 to Portfolio 2 to Portfolio 3 and so on

B Insufficient information

C Variance will not follow any specific order when we go from Portfolio 1 to Portfolio 2 to Portfolio 3 and so on

D Variance will increase when we go from Portfolio 1 to Portfolio 2 to Portfolio 3 and so on

E Variance will decrease when we go from Portfolio 1 to Portfolio 2 to Portfolio 3 and so on

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