In Order to Reduce Risk, One Should Diversify into Areas

question 29

True/False

In order to reduce risk, one should diversify into areas that are positively correlated with current areas of involvement.
One can "diversify away" some element of risk by combining investments that operate in opposite directions from each other.

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Definitions:

Rigorously Scientific

Adhering strictly to empirical standards and methods in research or study to ensure validity, reliability, and accuracy.

Experimentation

The process of conducting tests and analyses under controlled conditions to explore hypotheses and observe outcomes in research.

Personality

The aggregate of qualities or characteristics that distinguish an individual’s personal character.

Correlations

Statistical measures that describe the extent to which two variables change together, indicating the strength and direction of their relationship.