What risk metric could they consider? They could use the standard deviation as well as Beta.

However, in portfolio diversification we could also consider CAPM and Index Models in order to form a less risky portfolio. Which 2 stocks could them pick? Mylan Labs Placer Dome Why? When the team analyzes the stocks, they should look at the correlation between the returns of the firms stock and those of a diversified portfolio. That is the Beta. According to this measure, Mylan Labs and Placer Dome have the highest adjusted returns. Since the Beta measures the stocks volatility with respect to market, the team can find out the least risky stock with the greatest expected return.