You have a portfolio of 4 stocks with equal shares invested in each stock. Variances of individual stocks are the same and equal to σ 2 =16. Correlations between each pair of stocks is rho. a) What...

You have a portfolio of 4 stocks with equal shares invested in each stock. Variances
of individual stocks are the same and equal to σ²

=16. Correlations between each pair of stocks is
rho.
a) What would be the covariances between each pair of stocks as function of rho.
b) Find the variance of equally-portfolio of these 4 stocks (again as a function of rho)
c) What happens to the variance of your portfolio when rho increases.
d) What would be the variance of your portfolio when rho = 1. Would it be larger or smaller
than the variance of individual stocks σ²
= 16?