Creating a Portfolio by Buying Several Different Types of Investments

question 123

Multiple Choice

Creating a portfolio by buying several different types of investments to spread the risk of investing is called

• A) modulation.
• B) diversification.
• C) re-allocation.
• D) formula investing.

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Definitions:

Product-moment

Refers to a correlation coefficient developed by Karl Pearson that measures the strength and direction of a linear relationship between two variables.

Negative Correlation

A linkage between two variables that shows one increasing while the other decreases.

Coefficient of Alienation

A statistical measure that represents the amount of variation in one variable that is not accounted for by its relationship with another variable.

Positive Slope

An upward trend in a line graph indicating an increase in one variable as another variable increases.