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Author Question: Optimal risk reduction takes place when combining assets whose correlation coefficient is 0.0. ... (Read 105 times)

littleanan

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on: Jul 10, 2018
Optimal risk reduction takes place when combining assets whose correlation coefficient is 0.0.
 
  Indicate whether the statement is true or false.

Question 2

The truly wonderful thing about diversification is that 100 of risk can be diversified away, given a large enough portfolio.
 
  Indicate whether the statement is true or false.


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diana chang

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

Answer: FALSE
Explanation: Optimal risk reduction takes place when combining assets whose correlation coefficient is -1.0.

Answer to Question 2

Answer: FALSE
Explanation: Only unsystematic risk can be diversified away, not total risk.


littleanan

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Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

xiazhe

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Reply 3 on: Yesterday
Excellent

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