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Client wants to combine one of two stocks

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Suppose a client wants to combine one of two stocks, D and E with C. Stocks D and E both have the same expected return, 15%, but D's risk is 20% while E's risk equals 30%. However, CORR(C,D) equals +1.00 and CORR(C,E) is -.80. Which stock, D or E, should be combined in a portfolio with C? Explain.

Reference no: EM132272057

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