Stock A has a daily volatility of 1.2% and stock B has a daily volatility of 1.8%. The correlation between the two stock price returns is 0.2.
i) What is the standard deviation of the return from stock A over 4 days? _ _ _ _ _ _
ii) What is the standard deviation of the return from stock B over 4 days? _ _ _ _ _ _
iii) What is the standard deviation to the nearest $'000) of the 4-day change in the value of a portfolio consisting of a $1 million investment in stock A and a $1 million investment in stock B? _ _ _ _ _ _

Question

Quizplus · Accepted Answer

The Answer is i): 2.4%
ii): 3.6%
iii): $47,000

Stock a Has a Daily Volatility of 1