Assets whose returns have a high positive correlation are considered:
A)highly risky compared with those whose returns have lower or negative correlations..
B)completely risk free.
C)less risky compared to those which have a low positive correlation.
D)partially risky.

Question

Quizplus · Accepted Answer

Assets whose returns have a high positive correlation are highly risky compared with those whose returns have lower or negative correlations. This is because if two assets have highly positive correlated returns, their prices will move in the same direction (up or down) at the same time. Therefore, if one asset loses value, the other asset will also lose value, leading to a higher risk for the investor.

Assets Whose Returns Have a High Positive Correlation Are Considered