The most important criteria when adding new investments to a portfolio is the
A) Expected return of the new investment.
B) Standard deviation of the new investment.
C) Correlation of the new investment with the portfolio.
D) Both a and b
E) All of the above are equally important

Question

Quizplus · Accepted Answer

The correlation of the new investment with the portfolio is the most important criteria when adding new investments to a portfolio because it helps to diversify the portfolio and reduce overall risk. The expected return and standard deviation are also important factors to consider, but they should be evaluated in the context of the correlation with the existing investments in the portfolio.

The Most Important Criteria When Adding New Investments to a Portfolio