Studies of correlations among monthly U.S.bond price index returns have found:
A) Low correlations between investment grade bonds and high yield bonds
B) High correlations between investment grade bonds and high yield bonds
C) Low correlations between various investment grade bond indexes
D) Negative correlations between investment grade bonds and high yield bonds
E) None of the above

Question

Quizplus · Accepted Answer

Studies have found low correlations between investment grade bonds and high yield bonds. This is because investment grade bonds are considered less risky and have a higher credit quality, while high yield bonds have a lower credit quality and are considered more risky. As a result, their returns may not move in tandem with each other.

Studies of Correlations Among Monthly U