Expected return correlates positively with expected risk

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Reference no: EM1397578

Generally expected return correlates positively with expected risk.

1) X has the best expected return (assuming Sharon weren't return-indifferent this isn't as silly as it sounds when you're dealing with OPM)
2) X has the lowest expected risk
3) Z has the highest expected risk
4) X may be considered Y and Z are non-starters compared to current holdings.
Note that this comparison applies merely if X, Y, and Z are all equally correlated to existing holdings. Z may win the race if it were orthogonal to current holdings while X and Y were not.

Reference no: EM1397578

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