Answer:
<h3>In case of b, c, d ,e volatility is less than that of original stock</h3>Explanation:
The formula to compute the volatility of a portfolio
Here,
The standard deviation of the first stock is σ₁
The standard deviation of the second stock is σ₂
The weight of the first stock W₁
The weight of the second stock W₂
The correlation between the stock c
a) If the correlation between the stock is +1
Hence, the volatility of the portfolio is 0.33 0r 33%
b) If the correlation between the stock is 0.50
Hence, the volatility of the portfolio is 0.29 0r 29%
c) If the correlation between the stock is 0.00
Hence, the volatility of the portfolio is 0.23 0r 23%
d) If the correlation between the stock is -0.50
Hence, the volatility of the portfolio is 0.17 or 17%
e) If the correlation between the stock is -1
Hence, the volatility of the portfolio is 0
<h3>In case of b, c, d ,e volatility is less than that of original stock</h3>