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Consider an equally weighted portfolio of stocks in which each stock has a volatility of
40 %40%,
and the correlation between each pair of stocks is
20 %20%.
a. What is the volatility of the portfolio as the number of stocks becomes arbitrarily large?
b. What is the average correlation of each stock within this large portfolio?
a. What is the volatility of the portfolio as the number of stocks becomes arbitrarily large?
The volatility of the portfolio as the number of stocks becomes arbitrarily large is
nothing%.
(Round to two decimal places.)
b. What is the average correlation of each stock within this large portfolio?
The average correlation of each stock within this large portfolio is
nothing%.
(Round to two decimal places.)
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