An investor will get maximum risk reduction by combining assets that are
A) negatively correlated.
B) positively correlated.
C) uncorrelated.
D) perfectly, positively correlated.

Question

Quizplus · Accepted Answer

Combining assets that are negatively correlated provides the maximum risk reduction because they tend to move in opposite directions, meaning that when one asset loses value, the other will gain value. This diversification helps to reduce the overall volatility of the portfolio.

An Investor Will Get Maximum Risk Reduction by Combining Assets