Two assets whose returns move in the same direction and have a correlation coefficient of +1 are each very risky assets.

Question

Quizplus · Accepted Answer

A correlation coefficient of +1 indicates perfect positive correlation, meaning the assets move in the same direction, but it does not necessarily imply that each asset is very risky. Risk is determined by the volatility of each asset, not just their correlation.

Two Assets Whose Returns Move in the Same Direction and Have