Ask Question
BusinessBusiness
21 March, 15:31

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

-1.0

+1.0

0.0

none of the above

+1
Answers (1)
  1. 21 March, 15:43
    0
    -1.0

    Explanation:

    Diversification in a portfolio refers to spreading investments in such a way so as to minimize risk.

    The correlation coefficient r between two securities signifies how return from one security is related with another security. For example, two securities of the same sector may move in the same direction or positively correlated as in if price of one rises, the price of other rises too maybe not by the same margin.

    In case of a negative correlation, the security returns move in opposite directions i. e the securities are least related to one another.

    Maximum diversification is achieved when r is equal to - 1 i. e the two stocks move in opposite direction by the same magnitude.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
When listening to music on the radio, many consumers automatically switch stations when commercials begin to run, and they search until they find another station that is playing music. This tendency is an example of: A. Selective exposure. B.
Answers (1)
A management information system (MIS) is most likely responsible for which of the following? A. A company's new logo B. Fresher ingredients on a burger C. Friendlier salespeople D. Lowered hotel prices
Answers (1)
What are the six-step process of conducting an ethics audit in detail.
Answers (1)
Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250.
Answers (1)
An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a (n) : A) monopoly. B) oligopoly. C) monopolistic competition.
Answers (1)
New Questions in Business
Which statement about the Haymarket Affair is FALSE? a. Laborers were gathered at Haymarket Square to demonstrate for an eight-hour workday. b. The Knights of Labor was directly responsible for the violence that took place at Haymarket. c.
Answers (1)
Bonita Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021.
Answers (1)
The four major competitive structures include all buta) monopoliesb) oligopoliesc) brandd) pure competitione) monopolistic competition
Answers (1)
Plastic Company purchased 100 percent of Spoon Company's voting common stock for $648,000 on January 1, 20X4. At that date, Spoon reported assets of $690,000 and liabilities of $230,000.
Answers (1)
Which of the following statements describes an element of process costing systems? A. Total conversion costs include direct labor and manufacturing overhead costs included in beginning inventory and added to production during the period. B.
Answers (1)
Home » Business » Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of: -1.0 +1.0 0.0 none of the above
Sign Up Forgot Password?