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Lilly Santini
on Dec 08, 2024

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Other things equal, diversification is most effective when

A) securities' returns are uncorrelated.
B) securities' returns are positively correlated.
C) securities' returns are high.
D) securities' returns are negatively correlated.
E) securities' returns are positively correlated and high.

Diversification

The strategy of spreading investments across various financial assets to reduce exposure to risk.

Uncorrelated

Refers to two or more variables that do not have any predictive relationship with each other.

Negatively Correlated

A relationship between two variables in which one variable increases as the other decreases.

  • Grasp the concept of diversification and its effects on portfolio risk.
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Zhe Shuen ChongDec 13, 2024
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