Combining Assets with Highly Correlated Returns Will Greatly Reduce Portfolio

question 41

True/False

Combining assets with highly correlated returns will greatly reduce portfolio risk.
Just the opposite: Negative correlation spreads risk more effectively.

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Definitions:

Divisional Segment Margin

The profit margin for a specific division or segment of a company, calculated by subtracting direct and allocated expenses from segment revenues.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding non-operating income and expenses.

Common Fixed Expense

A recurring cost that does not vary with the level of output or sales, such as rent or salaries.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific product, department, or segment of a business, enabling more accurate profitability analysis.