Which of the Following Portfolios Would Have No Diversification Benefits

question 21

Multiple Choice

Which of the following portfolios would have no diversification benefits?

• A) A portfolio consisting of two perfectly positively correlated stocks
• B) A portfolio consisting of two perfectly negatively correlated stocks
• C) A portfolio consisting of two completely uncorrelated stocks
• D) A portfolio consisting of two stocks with the same standard deviation of returns
• E) A portfolio consisting of two stocks with the same beta coefficient

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Definitions:

Outliers

Observations that are significantly distant from the other observations in a data set, potentially indicating a measurement error or a different population.

Statistical Criteria

Standards or rules used in statistics to make decisions or interpretations about data, such as significance tests.

Sample

A subset of individuals, events, or items selected from a larger population used to conduct statistical analysis.

Pie Graph

A circular chart divided into sectors, each sector shows the relative size of some data.