Adding a Randomly Chosen New Stock to an Existing Portfolio

question 61

True/False

adding a randomly chosen new stock to an existing portfolio, the higher (or more positive) the degree of correlation between the new stock and stocks already in the portfolio, the less the additional stock will reduce the portfolio's risk.

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Definitions:

Means-end Analysis

A problem-solving strategy that involves breaking down the problem into smaller parts and achieving the desired goal through a series of steps.

Subgoals

Intermediate goals set as part of a strategy to achieve a larger, primary goal, making complex tasks more manageable by breaking them down.

Cognitive Capacities

The mental abilities or processes that are part of human cognition, such as memory, reasoning, and perception.

Primitive Thought

Early stage cognitive processes that are not refined or sophisticated, often relying on basic instincts and immediate responses rather than logical analysis.