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The volatility of a two stock portfolio is not simply the average of the two stocks' volatilities because of their:

ACorrelation
BCorporation
CContribution
DConstitution
Answer & Solution
Correct answer: A. Correlation
1. What matters is how the two move together. 2. Offsetting moves cancel some volatility. 3. So it depends on their correlation. _Source: OpenStax Principles of Finance, Chapter 15, Risk and Return._
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