Asked by
Lilly Santini
on Dec 08, 2024Verified
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.
Verified Answer
ZS
Learning Objectives
- Grasp the concept of diversification and its effects on portfolio risk.