In General, Which Stocks Should Be Combined in a Portfolio

question 43

Multiple Choice

In general, which stocks should be combined in a portfolio, if the goal is to reduce overall risk?

• A)stocks with returns that are positively correlated.
• B)stocks with returns that are negatively correlated.
• C)stocks with returns that are not correlated.
• D)stocks that have the highest expected returns.

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Definitions:

Expectations

The anticipations or beliefs about future events or outcomes, which can influence current behavior and decision-making.

Price of Oil

The cost per barrel of crude oil as determined in global markets, influenced by factors such as supply, demand, geopolitical events, and market speculation.

Unemployment

Is the condition of someone actively looking for employment but unable to find work, often used as a key economic indicator.

Central Bank

The principal monetary authority of a country, responsible for regulating the money supply, issuing currency, and managing interest rates to achieve economic objectives.