It is very important when diversifying that the correlation between rates of return for various countries be high and very stable over time.

Question

Quizplus · Accepted Answer

It is actually important that the correlation between rates of return for different countries be low or negative. This helps to lower overall portfolio risk by reducing the impact of market fluctuations in any one country. Additionally, correlations can change over time, so stability is not necessarily desirable.

It Is Very Important When Diversifying That the Correlation Between