When Adding a Randomly Chosen New Stock to an Existing

question 61

True/False

When 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:

High-low Method

A method employed in managerial accounting that calculates variable and fixed costs by analyzing the highest and lowest activity levels.

Variable Cost

Variable Cost consists of expenses that vary directly with levels of production or sales volume.

Machine Hour

A machine hour is a unit of measure that represents the operation of a machine for one hour, used in allocating manufacturing costs based on time.

Least-squares Regression

Least-squares regression is a statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed and predicted values.