You are holding shares in company apple and considering adding some shares in either company...
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You are holding shares in company apple and considering adding some shares in either company blue or company carrot. The standard deviation of these companies are exactly the same, but the correlation between the common stock return for company apple and company blue is 0.5, whereas it is -0.5 between the common stock return for company apple and company carrot. A. Evaluate how the risk is standard deviation if your investment will change if you decide to invest in company apple, blue and carrot. B. Assuming that the expected return on the stock of these three companies is the same, assess hoe your portfolios expected return will be affected by investment decisions in either company blue or company carrot or along company apple
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