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:

Dizygotic Twins

Twins born from two separate eggs fertilized by two different sperm, also known as fraternal twins.

Physical Trait

Observable characteristics of the body, including appearance, strength, and genetic features.

Genes

Units of heredity made up of DNA that carry information for the development, functioning, and reproduction of organisms.

Meiosis

A type of cell division that reduces the chromosome number by half, resulting in four haploid cells, each genetically distinct from the parent cell, involved in sexual reproduction.