The intercountry correlation coefficients for share price indices between Australia and other countries are as follows:
Which country is likely to offer the best diversification benefits for an Australian investor?

Question

The intercountry correlation coefficients for share price indices between Australia and other countries are as follows: 
Which country is likely to offer the best diversification benefits for an Australian investor?

Quizplus · Accepted Answer

A higher correlation coefficient between two countries' share price indices indicates a stronger relationship between the two markets, meaning that they may move in similar directions. Therefore, a lower correlation coefficient implies greater diversification benefits. Japan has the lowest correlation coefficient with Australia (0.26), compared to the US (0.94), Canada (0.89), and the UK (0.82), suggesting that it would offer the best diversification benefits for an Australian investor.

The Intercountry Correlation Coefficients for Share Price Indices Between Australia