If you are building a portfolio, then you desire those assets to have a correlation coefficient of one.

Question

Quizplus · Accepted Answer

If all assets in a portfolio have a correlation coefficient of one, then they move together in the same direction with the same magnitude. This would result in a portfolio that is not diverse and therefore, could be considered riskier. A more desirable portfolio would have assets with low or negative correlation coefficients, as it would provide greater diversification and potentially lower overall risk.

If You Are Building a Portfolio, Then You Desire Those