Author Question: While the covariance between stocks can take on a negative value, a correlation coefficient must be ... (Read 129 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?

When blood is deoxygenated and flowing back to the heart through the veins, it is dark reddish-blue in color. Blood in the arteries that is oxygenated and flowing out to the body is bright red. Whereas arterial blood comes out in spurts, venous blood flows.

Did you know?

Only 12 hours after an egg cell is fertilized by a sperm cell, the egg cell starts to divide. As it continues to divide, it moves along the fallopian tube toward the uterus at about 1 inch per day.

Did you know?

Elderly adults are at greatest risk of stroke and myocardial infarction and have the most to gain from prophylaxis. Patients ages 60 to 80 years with blood pressures above 160/90 mm Hg should benefit from antihypertensive treatment.

Did you know?

Eating food that has been cooked with poppy seeds may cause you to fail a drug screening test, because the seeds contain enough opiate alkaloids to register as a positive.

Did you know?

Anti-aging claims should not ever be believed. There is no supplement, medication, or any other substance that has been proven to slow or stop the aging process.

For a complete list of videos, visit our video library