The volatility of Woolworth's share price is 30% and that of Reckon's shares is 30%. When I hold both shares in my portfolio with an equal amount in each, and the returns have a correlation of minus 1, the overall volatility of returns of the portfolio is

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Quizplus · Accepted Answer

When the correlation between the returns of two assets is -1, their returns move in opposite directions. Therefore, when one stock's return is high, the other stock's return is low, resulting in a canceling effect on the overall returns of the portfolio. Hence, the overall volatility of the portfolio is zero.

The Volatility of Woolworth's Share Price Is 30% and That