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:

Higher Energy

Describes a state where a system or particle has increased energy, often requiring input of energy to reach this state.

Electromagnetic Spectrum

The range of all types of electromagnetic radiation, from gamma rays to radio waves.

Increasing Wavelength

A phenomenon where the wavelength of light or other electromagnetic radiation becomes longer, moving from higher energy to lower energy on the spectrum.

Directly Proportional

A relationship between two variables where they increase or decrease in conjunction with each other at a constant ratio.