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30 January, 19:34

Which of the following statements is MOST correct concerning diversification and risk? A. Asset allocation is important for pension funds but not for individual investors. B. There is no diversification effect if two stocks in a portfolio are perfectly correlated. C. Diversification is mainly achieved by the selection of individual securities for each type of asset held in a portfolio. D. Stocks with negative return correlations in a portfolio lead to dramatic increase in risk.

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  1. 30 January, 19:46
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    C. Diversification is mainly achieved by the selection of individual securities for each type of asset held in a portfolio.

    Explanation:

    Diversification permits to have different assets in portfolio of different nature. In case of failure of any of the assets, the performance is shield.
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