Even If the Correlation Between the Returns on Two Securities

question 34

True/False

Even if the correlation between the returns on two securities is +1.0, if the securities are combined in the correct proportions, the resulting 2-asset portfolio will have less risk than either security held alone.

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Definitions:

Material

Refers to the physical substances from which things can be made, including any component used in the manufacture or construction of goods.

REM

Rapid Eye Movement, a phase of sleep characterized by fast and random movements of the eyes, often associated with vivid dreaming.

Postural Muscles

Muscles that help maintain posture and balance, typically by resisting gravity.

Breathing Rate

The number of breaths a person takes per minute, an important parameter in assessing respiratory health or effort.