Author Question: While the covariance between stocks can take on a negative value, a correlation coefficient must be ... (Read 59 times)

brutforce

  • Hero Member
  • *****
  • Posts: 540
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

  • Sr. Member
  • ****
  • Posts: 366
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.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

There are immediate benefits of chiropractic adjustments that are visible via magnetic resonance imaging (MRI). It shows that spinal manipulation therapy is effective in decreasing pain and increasing the gaps between the vertebrae, reducing pressure that leads to pain.

Did you know?

Addicts to opiates often avoid treatment because they are afraid of withdrawal. Though unpleasant, with proper management, withdrawal is rarely fatal and passes relatively quickly.

Did you know?

Cyanide works by making the human body unable to use oxygen.

Did you know?

Approximately one in four people diagnosed with diabetes will develop foot problems. Of these, about one-third will require lower extremity amputation.

Did you know?

Amphetamine poisoning can cause intravascular coagulation, circulatory collapse, rhabdomyolysis, ischemic colitis, acute psychosis, hyperthermia, respiratory distress syndrome, and pericarditis.

For a complete list of videos, visit our video library