Which one of the following correlation relationships has the potential to completely eliminate risk?
A)perfectly positive
B)positive
C)negative
D)perfectly negative
E)uncorrelated

Question

Quizplus · Accepted Answer

A perfectly negative correlation means that the two assets move in opposite directions at all times, meaning that when one decreases in value, the other increases in value. This provides a completely hedged portfolio, essentially eliminating all risk.

Which One of the Following Correlation Relationships Has the Potential