A Portfolio Manager Is Considering Adding Another Security to His

question 48

Multiple Choice

A portfolio manager is considering adding another security to his portfolio. The correlations of the 5 alternatives available are listed below. Which security would enable the highest level of risk diversification?

• A)0.0
• B)0.25
• C)-0.25
• D)-0.75
• E)1.0

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Definitions:

Beliefs And Behaviors

The interrelation between what individuals hold to be true and how these convictions are manifested in their actions or conduct.

Metaphysical Environment

A concept referring to an abstract, non-physical realm that might encompass ideas, spiritual forces, or other non-material influences on reality.

Physical Environment

The surrounding conditions and physical factors, including geography, climate, and built environments, in which individuals or populations live.

Unconscious Environment

Influences from one's surroundings that affect behavior and decision-making processes without one's explicit awareness.