The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index. Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock?
A) Stock A
B) Stock B
C) There is no difference between A or B.
D) The answer cannot be determined from the information given.

Question

The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index.  Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock?
A) Stock A 
B) Stock B 
C) There is no difference between A or B. 
D) The answer cannot be determined from the information given.

Quizplus · Accepted Answer

The Answer of The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index.  Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock?
A) Stock A 
B) Stock B 
C) There is no difference between A or B. 
D) The answer cannot be determined from the information given.

The Figures Below Show Plots of Monthly Excess Returns for Two