The benefits of diversification occur as long as the investments in a portfolio are not perfectly positively correlated.

Question

Quizplus · Accepted Answer

The benefits of diversification come from holding multiple investments with varying returns and risks. If all the investments are perfectly positively correlated, they will all move together, and diversification will not help spread risk. Therefore, as long as the investments in a portfolio are not perfectly positively correlated, the benefits of diversification occur.

The Benefits of Diversification Occur as Long as the Investments