Assume You Are Considering Combining Two Investments to Form a Portfolio

Multiple Choice

Assume you are considering combining two investments to form a portfolio and you are very concerned with the risk that will result from the combination. If you want to attain the greatest effect from diversification, you would prefer that the assets _____.

A) are negatively related
B) are positively related
C) are not related
D) have a negative coefficient of variation
E) have a positive coefficient of variation