The elements in the off-diagonal positions of the variance/covariance matrix are:
A) covariances.
B) security selections.
C) variances.
D) security weights.
E) None of these.

Question

Quizplus · Accepted Answer

The off-diagonal positions in a variance/covariance matrix contain covariances between the different assets in the portfolio. Covariance is a measure of how two assets move in relation to each other. Therefore, the correct answer is A) covariances.

The Elements in the Off-Diagonal Positions of the Variance/covariance Matrix