One of your friends does not have the pleasure of doing the Finance complementary course comes to you, as an expert in portfolio management, with the following information:
• It intends to invest in two assets with an expected return of 4 and 7%,
• Standard deviations are 3% and 6% respectively.
• The correlation between assets is perfect and negative (= -1).
• The risk-free rate is 4%.
You know from your price that when two assets are negatively correlated, the weighting that leads to the minimum variance portfolio can be found through the following formula:
XA,min=?B/(?A+?B)
What do you think of the information given by your friend?
