Problem 1:
Stock X has a standard deviation of returns of 0.6, and Stock Y has a standard deviation of 0.4. The correlation of the two stocks is 0.5. Compute the standard deviation of a portfolio invested half in X and half in Y.
Problem 2:
The expected standard deviation of market returns is 0.20.Maria Houseman has the following four stocks:
Security Standard Correlation
Deviation with matket
A 0.30 0.70
B 0.75 0.30
C 0.45 0.50
D 0.50 0.16
Compute the beta of each stock.