Question

Which of the following statements is true? Group of answer choices A) Diversification is more effective...

Which of the following statements is true?

Group of answer choices

A) Diversification is more effective in reducing risk when stocks are more strongly correlated with each other.

B) Diversification allows to reduce portfolio standard deviation to zero level.

C) Diversification is more effective in reducing risk when stocks are weakly correlated with each other.

D) Diversification allows to reduce some, but not all, portfolio risk.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #2

Option C) Diversification is more effective in reducing risk when stocks weakly correlated with each other is the correct answer.

Explanation:
Diversification is the approach to reduce risk by allotting investments within several financial instruments.

Diversification reduces the unsystematic risk that linked to a particular company, industry, or country.

Diversification can reduce risk to some extent but not to zero.

If the stocks are weakly correlated, then diversification accomplishes great.

Thank you, please give an upvote

answered by: anonymous
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A portfolio of two perfectly _________ stocks has no diversification effect Group of answer choices uncorrelated...
A portfolio of two perfectly _________ stocks has no diversification effect Group of answer choices uncorrelated negatively correlated positively correlated risk-free
The risk of a completely diversified portfolio ______________. Group of answer choices can be regarded as...
The risk of a completely diversified portfolio ______________. Group of answer choices can be regarded as the standard deviation of the market portfolio has only systematic risk and no unsystematic risk can be regarded as the variance of the market portfolio has only unsystematic risk and no systematic risk A portfolio of two perfectly _________ stocks has no diversification effect Group of answer choices uncorrelated positively correlated negatively correlated risk-free
Which of the following statements are true of correlation coefficients? Group of answer choices The more...
Which of the following statements are true of correlation coefficients? Group of answer choices The more negative the number is, the weaker the relationship. A correlation coefficient of -0.90 indicates that there is an inconsistent relationship between the variables. The closer the coefficient is to 1 or -1, the weaker the relationship. A correlation coefficient of 0.05 indicates that there is an inconsistent relationship between the variables. Which type of analysis is more flexible than an independent-samples t-test and allows...
Which of the following statements is incorrect regarding international diversification? Group of answer choices International diversification...
Which of the following statements is incorrect regarding international diversification? Group of answer choices International diversification across equities fails during market downturns. International diversification leads to better improvements in the efficient frontier for investors in developing economies than for investors in developed economies. International diversification across sectors or across markets provides similar improvement in the efficient frontier. International diversification improves the efficient frontier for investors in both developed and developing economies. International diversification should consider the type and weighting of...
1.Which of the follwing statements about portfolio risk are true. a) the riskiness of a portfolio...
1.Which of the follwing statements about portfolio risk are true. a) the riskiness of a portfolio is the weighted average of the imdividual assets' standard deviations b) two stocks can be individually quite risky but when they are combined to form a portfolio it is possible that they are not risky at all c) diversification only wants to reduce risk if you portfolios and fix it perfectly positively related stocks (securities) d) all of the above 2. which of the...
The primary purpose of portfolio diversification is to: Group of answer choices A.increase returns and risks....
The primary purpose of portfolio diversification is to: Group of answer choices A.increase returns and risks. B.eliminate all risks. C.eliminate firm-specific risk. D.eliminate systematic risk. E.lower both returns and risks.
Which of the following statements is not true about the secant function? Group of answer choices...
Which of the following statements is not true about the secant function? Group of answer choices |sec⁡x|≥1 for all x in the domain of the secant function. The secant function is even. The secant function has period 2π. The graph of the secant function has a vertical asymptote at every integer multiple of π. ALL OF THE OTHER STATEMENTS ARE TRUE.
Which of the following statements is true? Group of answer choices technology will increase labor productivity....
Which of the following statements is true? Group of answer choices technology will increase labor productivity. technology will reduce the number of firms in the industry. technology is a bad source of economic inefficiency for firms. technology will make it more costly to produce goods and services. technology is a factor of low production
which of the following statements is true about diversification and risk? With higher number of assets,...
which of the following statements is true about diversification and risk? With higher number of assets, the company specific risk approaches zero and total portfolio risk falls to the systematic risk (market risk) With higher number of assets, the company specific risk approaches the systematic risk (market risk) With higher number of assets, the total portfolio risk increases to the sum of the individual company specific risk and the systematic risk (market risk) With higher number of assets, total portfolio...
Which of the following statements about consumption spending is true? Group of answer choices an increase...
Which of the following statements about consumption spending is true? Group of answer choices an increase in wealth leads to a decrease in consumption borrowing allows higher consumption in the present but causes lower consumption in the future lower interest rates tend to decrease borrowing and consumption spending an increase in saving leads to higher consumption
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT