Multiple Choice
In a two-asset portfolio,Stock A and Stock B have a measured correlationship of r = -.80.Which of the following best describes the impact on the portfolio of having "A" and "B" in the portfolio?
A) A and B are perfectly positively correlated, which reduces diversification.
B) A and B are negatively correlated, which improves diversification in the portfolio.
C) A and B are negatively correlated, which reduces diversification in the portfolio.
D) A and B are perfectly negatively correlated, which reduces diversification.
Correct Answer:
Verified
Correct Answer:
Verified
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