Consider two stocks. The result of simulation shows that their expected value are both $20. The standard deviation of Stock A is 15% while that of stock B is 20%. Which statement is true?

A. Stock A is definitely less risky.
B. Stock B is definitely less risky.
C. Stock A is most likely less risky.

Correct Answer: C

It depends on how much of the stock's risk can be diversified away. Stock A may be considered less risky than stock B, but nothing is 100% certain.