Combining Two Stocks to Form a Portfolio Offers Maximum Diversification

question 20

Multiple Choice

Combining two stocks to form a portfolio offers maximum diversification benefits when _____. 

• A)the stocks have a correlation coefficient equal to 0
• B)the stocks have a correlation coefficient equal to +1
• C)the stocks have a correlation coefficient equal to -1
• D)the both stocks have a coefficients of variation of 0
• E)both stocks have a coefficients of variation of -1

---

Definitions:

Job Costing System

An accounting method used to assign costs to specific jobs or projects to accurately track expenses and estimate future costs and profitability.

Operation Costing System

An Operation Costing System is a hybrid costing method used to calculate the cost of products that have both characteristics of batch-produced and continuously produced items.

Direct Materials

Raw materials that can be directly traced to the production of specific goods or services, such as wood for furniture or fabric for clothing.

Tea Leaves

Used metaphorically to refer to signs or indicators that predict future trends or outcomes, traditionally derived from reading patterns in tea leaves.