zray

Since the correlation between that stock and current portfolio is 0.38, then the new portfolio that combines the current one and the new stock should have a std dev less than the current value, which is 15.5%. Let's square root 0.026 and get the new std dev=16.12%, which is larger than 15.5%. It's impossible cuz based on their correlation, adding that stock should be able to diversify away some of the unsystematic risk, no matter what weight and std dev of that stock to be added to the portfolio.

Thanks.