CFA Level 1 Exam
Question No. 1
You currently own Cavanaugh Inc. and are thinking of adding either Coe Co. or Firm Co. to your holdings. All three stocks offer the same expected return and total risk. The covariance of returns between Cavanaugh and Coe is +0.5 and the covariance between Cavanaugh and Firm Co. is – 0.5. Portfolio’s risk would:
Choose the correct option from the given list.
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