Question

If an investor owns shares of stock in Huskey Oil Company, then which of the following...

If an investor owns shares of stock in Huskey Oil Company, then which of the following investment provides the least amount of risk reduction?

____

  1. Stock in RBC Financial Group
  2. Canadian Treasury bills
  3. Stock in Petro Canada
  4. Stock in Air Canada
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Answer #1

When the investor is owning shares in a huskey oil company, it will mean that it has already exposurev into the oil sector and when it is is buying the stocks of petro-canada, it will mean that it is having a double exposure of the same security so he would be exposed to the double risk and it will offer in the least amount of risk reduction.

Buying of the stocks in Air Canada will offer him with the hedge because Airlines companies are always buyers of the oil and they want the prices to fall .

Canadian treasury bills and stocks in RBC financial group are also investment into different sectors and that will offer diversification and risk reduction

Correct answer option (C) stocks in petro Canada.

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