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A risk manager seeks to hedge an investment in zirconium by using futures contracts. However, there are no existing futures contracts specifically for zirconium. To select the most appropriate futures contract for this purpose, the manager has performed a regression analysis summarizing how daily price changes in zirconium correlate with daily price changes in other assets that have available futures contracts. The regression results are shown in the table below:
Asset | α | β | R2 |
---|---|---|---|
A | 1.25 | 1.03 | 0.62 |
B | 0.67 | 1.57 | 0.81 |
C | 0.01 | 0.86 | 0.35 |
D | 4.56 | 2.30 | 0.45 |
Using the regression data provided, which asset's futures contract is likely to minimize basis risk when employed to hedge the zirconium investment?