As Long as the Coefficient of Correlation Between Two Stocks

question 24

True/False

As long as the coefficient of correlation between two stocks is less than +1,some reduction in risk can be obtained by combining the securities.

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Definitions:

Behavioral Model

A framework for understanding and predicting how individuals act based on learned behaviors and responses.

Abnormal Behavior

Behaviors or activities that significantly differ from what is deemed typical or normal in a given culture or society.

Learning

The process of acquiring new, or modifying existing, knowledge, behaviors, skills, values, or preferences.

Psychoanalytic Approach

A psychological theory or method which emphasizes unconscious processes and childhood experiences in explaining the human mind and behaviors.