Even If the Correlation Between the Returns on Two Different

question 36

True/False

Even if the correlation between the returns on two different securities is perfectly positive, if the securities are combined in the correct unequal proportions, the resulting portfolio can have less risk than either security held alone.

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Definitions:

Degrees Of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution or to a system undergoing a number of constraints.

Independent Samples

Two or more groups of data that are collected from distinct, non-overlapping populations, allowing for comparisons that assume no inherent relationship between the groups.

Matched Pairs

A design in experiments where pairs of subjects are closely matched on key characteristics, with one subject in each pair receiving each treatment.

Test Statistic

A calculated value from sample data used to determine the p-value in hypothesis testing, assessing the likelihood of observing the results under the null hypothesis.