All else the same, a correlation of __________ will result in the least diversification benefits.
A) - 100
B) - 1
C) 0
D) + 1
E) + 100

Question

Quizplus · Accepted Answer

A correlation of +1 implies perfect positive correlation between two assets, which means their returns move exactly in the same direction. As a result, combining these two assets in a portfolio would provide very little diversification benefits since they will respond in the same way to market shocks.

All Else the Same, a Correlation of __________ Will Result