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Question 6: A hedge fund has created a portfolio using just two stocks. It has...

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Finance

Question 6: A hedge fund has created a portfolio using just two stocks. It has shorted

$38,000,000

worth of Oracle stock and has purchased

$67,000,000

of Intel stock. The correlation between Oracle's and Intel's returns is

0.65.

The expected returns and standard deviations of the two stocks are given in the following table below.

Suppose the correlation between Intel and Oracle's stock increases, but nothing else changes. Would the portfolio be more or less risky with this change?

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A hedge fund has created a portfolio using just two stocks. It has shorted $38,000,000 worth of Oracle stock and has purchased $67,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65 . The expected returns and standard deviations of the two stocks are given in the following table: Suppose the correlation between Intel and Oracle's stock increases, but nothing else changes. Would the portfolio be more or less risky with this change? (Select the best choice below.) A. More risky. B. Less risky. C. Cannot say without knowing how investors trade off expected return and volatility. D. Riskiness of the portfolio stays the same. Data table (Click on the following icon in order to copy its contents into a spreadsheet.)

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