the returns of two firms are negatively correlated, then one of them must have a negative beta.

Question

Quizplus · Accepted Answer

If the returns of two firms are negatively correlated, it means that when the return of one firm increases, the return of the other firm tends to decrease. This suggests that the two firms are in different industries or have different business models, and their returns are not driven by the same factors. In such a case, it is possible for one of the firms to have a negative beta, which means that its returns tend to move in the opposite direction of the market.

The Returns of Two Firms Are Negatively Correlated, Then One