Two Signals, One Ceiling

A researcher regresses a stock's daily return on signal A alone, with an intercept, and gets R2=0.16R^2 = 0.16. Regressing the same returns on signal B alone gives R2=0.25R^2 = 0.25. She now runs one regression on A and B together. What is the largest R2R^2 that regression could possibly produce, and what would the two signals have to look like for that to happen?

Answer

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