For a security to help diversify a portfolio, the asset

Question

For a security to help diversify a portfolio, the asset​

Quizplus · Accepted Answer

A security that has a return that is negatively correlated with the return on other securities in the portfolio will help reduce overall portfolio risk through diversification. This means that when other securities in the portfolio decrease in value, the diversifying security will increase in value, and vice versa. It is not necessary for the diversifying security to generate a greater return than the average return on the portfolio or be insensitive to changes in security prices. It may or may not be a debt instrument, depending on the specific securities in the portfolio.

For a Security to Help Diversify a Portfolio, the Asset​

For a Security to Help Diversify a Portfolio, the Asset