12-9 Portfolio risk can be reduced through diversification only if the returns of the loans in the portfolio are negatively correlated.

Name: 12-9 Portfolio risk can be reduced through diversification only if the returns of the loans in the portfolio are negatively correlated.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Diversification reduces portfolio risk as long as the returns of the loans are not perfectly positively correlated, meaning they can be uncorrelated or even positively correlated to some extent.

12-9 Portfolio Risk Can Be Reduced Through Diversification Only If