For diversification to be achieved by foreign investments,the returns on such investments must be positively correlated with the returns from U.S.securities.

Question

Quizplus · Accepted Answer

To achieve diversification, foreign investments should have a low or negative correlation with the returns of US securities. If the returns of foreign investments are positively correlated with US securities, it means they are moving in the same direction, and investing in both would not provide diversification benefits.

For Diversification to Be Achieved by Foreign Investments,the Returns on Such