Calculate the diversification benefit of holding GM stock

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Question - Consider that GM is trading at $37 and GE is trading at $14.

In your portfolio own $1,000,000 of GM and 6,000,000 of GE. GE has an annualized volatility of 38% and GM's annualized volatility is 46%.

The correlation between the two stocks is .27%.

Using your notes calculate:

a. The day 99% Var for each stock.

b. The 5 day 95% Var for the two stock portfolio.

c. The diversification benefit of holding GM stock at the 99% confidence interval for 10 days.

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Reference no: EM131974566

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