You have a twostock portfolio. One stock has an expected return of 12% and a standard deviation of 24%. The other has an expected return of 8% and a standard deviation of 20%. You invested in these stocks equally (50% of your investment went toward each of the two stocks). If the two stocks are negatively correlated, which one of the following is the most feasible standard deviation of the portfolio?

The answer is 18%
Standard Deviation of a portfolio is lower than the weighted average Standard deviation when the correletion between stocks is less than +1
Since the stocks are negatively correlated, the standard deviation will be lower than the weighted average standard deviations
25% cannot be the answer as portfolio standard deviation cannot be higher than the individual stocks
22% is weighted average, It is not correct since the correlation is negative
18% is a feasible number and hence, the answer
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