Investment choice to make between three portfolios

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An investor has an investment choice to make between three portfolios. The first portfolio (Portfolio 1) which has a risk of 2.50% is an equally weighted portfolio of stock A and stock B. The risk of A and B are 10% and 15% respectively. The second portfolio (Portfolio 2) which has a risk of 10.75% is an equally weighted portfolio or stock C and stock D. The risk of C and D are 12.50% and 17.50% respectively. The third portfolio (Portfolio 3) which has a risk of 15% is an equally weighted portfolio of stock E and stock F, which have the same individual risk as the portfolio. If the investors choice is conditional on the portfolio having the lowest correlation, which portfolio will he choose?

Reference no: EM13917685

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