Combining assets that are not perfectly positively correlated with each other can reduce the overall variability of returns.

Question

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By combining assets that are not perfectly positively correlated with each other, investors can create a diversified portfolio that reduces the overall variability of returns. This is because the performance of different assets is affected by different market factors and events, and by holding a mix of assets, investors can spread their risk and potentially earn a more stable return over time.

Combining Assets That Are Not Perfectly Positively Correlated with Each