liquidity

Official ans from Qbank
The goal is to add a greater return to the portfolio without appreciably increasing the level of risk. Since the portfolio is already well diversified most of its risk is related to systematic risk (beta) which is the relevant measure of risk in the denominator of the Treynor measure. Adding one risky stock to an already diversified portfolio will not appreciably change the overall risk of the portfolio thus beta and the Treynor measure remain the relevant measures used to compare the results of the portfolio with and without the addition of the stock. The Sharpe ratio uses standard deviation in the denominator of the equation. Standard deviation is comprised of systematic risk (beta) and unsystematic risk. If the portfolio was not well diversified then most of the risk would be unsystematic or company specific risk. Adding one stock to an undiversified portfolio would most likely still leave a lot of unsystematic risk thus making standard deviation and the Sharpe ratio the relevant measures if the portfolio was undiversified. The information ratio is used to compare the return to a benchmark which is not a concern to the portfolio manager in this question.
I think I need a good/long break. Good luck forks, see you tomorrow with a fresh mind.

Viceroy

Agreed, I would say choice A for the same reason cpk mentioned. The traditional way to see if it’s worth adding a stock to a portfolio is to compare the Sharpe ratio of the asset being added to the Sharpe ratio of the existing portfolio (multiplied by its correlation to the stock). So Sharpe Ratio is most relevant.
Info ratio isn’t relevant in my opinion, agreed with cpk.
I forget what the Treynor measure is.

strikethree

Typically opaque question , but I am going to assume “overall” means “total” , so A , Sharpe Ratio

iteracom

Given the usual way is to take
Is SR (Asset being added) > SR (Portfolio) * Correlation (Asset, Portfolio)
I am inclined to go with SR (Sharpe Ratio) - choice A.
C). Information Ratio = Active Return / Active Risk -> not applicable in this situation.
B) Treynor measure = (Rp - Rf) / Betap -> not applicable.