Q No 3Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to create a portfolio investment in these three stocks. The details of the stocks are given below:
Company name
Volatility
(Standard deviation)
Weight in Portfolio
Correlation with the market portfolio
Engro Ltd
25%
0.30
0.40
Lucky Cement Ltd
12%
0.60
FFC Ltd
13%
0.50
The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%.
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