Question 81 risk, correlation, diversification
Stock A and B's returns have a correlation of 0.3. Which statement is NOT correct?
(a) If stock A's return increases, stock B's return is also expected to increase.
(b) If stock A's return decreases, stock B's return is also expected to decrease.
(c) If stock A and B were combined in a portfolio, there would be no diversification at all since they are positively correlated.
(d) Stock A and B's returns have positive covariance.
(e) a and b.
Copyright © 2014 Keith Woodward