In General, Which Stocks Should Be Combined in a Portfolio

question 29

Multiple Choice

In general, which stocks should be combined in a portfolio if the goal is to reduce overall risk?

• A)Stocks with returns that are positively correlated
• B)Stocks with returns that are negatively correlated
• C)Stocks with returns that are not correlated
• D)Stocks that have the highest expected returns

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Definitions:

Population Standard Deviation

The square root of the variance in a population, reflecting how much individual data points in the entire population deviate from the population mean.

Confidence Level

The degree of certainty or probability with which a parameter of a population is estimated.

Sample Size

The number of observations or data points that are included in a sample for analysis.

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how spread out the values are from the mean.