The more positive the degree of correlation between two assets,the greater the risk reduction when the assets are combined.

Name: The more positive the degree of correlation between two assets,the greater the risk reduction when the assets are combined.
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Question

Quizplus · Accepted Answer

A more positive degree of correlation between two assets means their prices move more similarly, reducing the potential for risk reduction when combined in a portfolio. Diversification benefits are greater when assets have low or negative correlations.

The More Positive the Degree of Correlation Between Two Assets,the