Problem
I. Review the example from the lecture about Umbrella Inc and Sunscreen Inc. Both companies have 10% return & 45% volatility and are perfectly negatively correlated.
Assume you sell 25% of Umbrella Inc and buy Sunscreen Inc. such that you hold 75% Umbrella and 25% Sunscreen. What is the return and risk of that portfolio?
II. Review the example from the lecture about Umbrella Inc and Sunscreen Inc. Both companies have 10% return & 45% volatility and are perfectly negatively correlated.
Assume you sell 50% of Umbrella and buy Sunscreen such that you now hold 50% of each stock. What is the return and risk of that portfolio?