Correlation coefficients relating U.S.stock markets and foreign stock markets

Question

Quizplus · Accepted Answer

Correlation coefficients between U.S. and foreign stock markets suggest the possibility of diversification. This is because if the correlation is not perfect, combining investments in different markets can reduce overall portfolio risk. Option A is incorrect as correlation coefficients can be positive or negative, depending on the data. Option B is incorrect because correlation coefficients can remain stable over time. Option C is incorrect because beta coefficients measure the volatility of a stock or portfolio relative to the overall market, whereas correlation coefficients measure the degree of association between two variables.

Correlation Coefficients Relating U