If the returns of two stocks are perfectly correlated, then
A)their betas should each equal 1.0.
B)the sum of their betas should equal 1.0.
C)their correlation coefficient should equal 1.0.
D)their portfolio standard deviation should equal 1.0.

Question

Quizplus · Accepted Answer

The correlation coefficient measures the degree to which two variables move in relation to each other. If two stocks are perfectly correlated, their correlation coefficient should equal 1.0, indicating that they move together perfectly in the same direction.

If the Returns of Two Stocks Are Perfectly Correlated, Then