If two securities have the same positive mean returns and they are perfectly,negatively correlated,an investor in such securities will earn a positive return with zero risk.

Question

Quizplus · Accepted Answer

Since the securities are perfectly negatively correlated, they tend to move in opposite directions. Therefore, when one security is experiencing a negative return, the other security would experience a positive return, resulting in a net positive return on the portfolio. However, there is still some level of risk involved because no investment is completely risk-free.

If Two Securities Have the Same Positive Mean Returns and They