If the Return on Two Stocks Is Highly and Positively

question 51

True/False

If the return on two stocks is highly and positively correlated (i.e., correlation coefficient=+1.0), combining these stocks will reduce the risk associated with the portfolio.

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Definitions:

Search Committee

A group of people designated to conduct the process of seeking and recommending candidates for a specific position or role.

Interview Order

The sequence in which candidates are interviewed, which can potentially influence the perception and evaluation of each candidate by the interviewer.

Mere Exposure Effect

The mental effect where individuals start favoring items simply because they have become acquainted with them.

Balance Theory

A psychological theory suggesting that individuals strive for consistency and balance in their relationships and beliefs within a triad of entities (P-O-X model).