Question

The volatility of Home Depot share prices is 20% and that of General Motors shares is 20%. When I hold both stocks in my portfolio, the overall volatility of the portfolio is ________.

Answer 1

Answer:

The question is either incomplete or not possible to calculate as information is inadequate

Explanation:

Answer 2

Answer:

The correct answer is letter "D": not possible to calculate as information is inadequate.

Explanation:

Portfolio Variance provides a measure of portfolio volatility. Portfolio variance is a two-sided function: the first of these is the variance of each portfolio asset; the second is how each of those assets is fluctuating in relation to each other, which is the covariance towards each other.

Thus, to determine the volatility of a portfolio several factors of each asset included must be considered, not only the share price of the stocks that compose the portfolio. The information provided in the example is vague and inadequate.