Which one of the following concerns is likely to be most important to portfolio investors seeking diversification?
A) Total volatility of individual securities
B) Standard deviation of individual securities
C) Correlation of returns between securities
D) Achieving the risk-free rate of return

Question

Quizplus · Accepted Answer

Portfolio investors seeking diversification are likely to prioritize the correlation of returns between securities. The goal of diversification is to reduce overall portfolio risk by investing in assets that have low or negative correlations with each other. By selecting assets with different correlations, portfolio investors can achieve a more stable and predictable portfolio return. Total volatility and standard deviation are also important factors to consider, but they do not necessarily guarantee diversification. Achieving the risk-free rate of return may be a consideration for some investors, but it is not directly related to the goal of diversification.

Which One of the Following Concerns Is Likely to Be