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Author Question: While the covariance between stocks can take on a negative value, a correlation coefficient must be ... (Read 125 times)

brutforce

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on: Jul 10, 2018
While the covariance between stocks can take on a negative value, a correlation coefficient must be positive, or at a minimum, zero.
 
  Indicate whether the statement is true or false.

Question 2

The more positive the degree of correlation between two assets, the greater the risk reduction when the assets are combined.
 
  Indicate whether the statement is true or false.


ryhom

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: FALSE
Explanation: Correlation coefficients can range from a value of +1.0 to -1.0.

Answer to Question 2

Answer: FALSE
Explanation: The LOWER the degree of correlation between two assets, the greater the risk reduction when the assets are combined.


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