Which of the analysts arguments is correct

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Problem 1: You are a portfolio manager building a low-risk portfolio. Two of your analysts are arguing over whether the portfolio should include shares in Intelsat, the satellite manufacturer. Which of the following of the analysts' arguments is correct?

Option 1: The stock should not be included because it is too risky. It has a very high standard deviation of returns, because if a rocket launch fails, then the company loses a satellite worth more than $250 million.

Option 2: The stock should not be included because it is too risky. It has a very high standard deviation of returns, because if a rocket launch fails, then the company loses a satellite worth more than $250 million.

Option 3: The stock should be included, because it is low risk. The event of a launch failure is uncorrelated with the risks affecting the other stocks in the portfolio.

Reference no: EM132906606

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