Correlation Is The

question 36

Multiple Choice

Correlation is the:

• A)squared measure of a security's total risk.
• B)extent to which the returns on two assets move together.
• C)measurement of the systematic risk contained in an asset.
• D)daily return on an asset compared to its previous daily return.
• E)spreading of an investment across a number of assets.

---

Definitions:

Passive Strategy

An investment strategy that aims to match, rather than outperform, market returns by mimicking the investment holdings of a particular index.

Benchmark Portfolio

A standard or point of reference against which the performance of an investment portfolio can be measured.

M-Squared Measure

A measure used in finance to evaluate the performance of an investment portfolio by adjusting for its risk level compared to a benchmark.

Risk-Adjusted Return

This is a measure of how much risk is involved in generating a security's or portfolio's return, helping investors to compare the performance of different investments on a risk-adjusted basis.