When a New Stock Is Introduced into a Portfolio and the "Peaks

question 38

True/False

When a new stock is introduced into a portfolio and the "peaks" in its return occur with the "valleys" in the portfolio's return, the stock's return is said to be perfectly negatively correlated with the portfolio's, and its addition will reduce the portfolio's risk.

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Definitions:

Physical Capital

The tangible assets that are used in the production of goods and services, including buildings, machinery, and equipment.

Dinner

The main meal of the day, traditionally eaten in the evening.

Microeconomics

The branch of economics that studies how people make decisions and how those decisions interact.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources.