For a Two-Stock Portfolio, the Maximum Reduction in Risk Occurs

question 33

Multiple Choice

For a two-stock portfolio, the maximum reduction in risk occurs when the correlation coefficient between the two stocks equals

• A)+1.0.
• B)-0.5.
• C)-1.0.
• D)0.0.

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Definitions:

Hypomania

A less severe, less disruptive, and often shorter version of a manic episode.

Anhedonia

A condition characterized by the inability to feel pleasure in normally pleasurable activities, often associated with depression and other psychiatric disorders.

Pleasure

Pleasure is a state of gratification or enjoyment that can arise from sensory experiences, emotional connections, or engaging activities.

Interest

A psychological state of engagement and curiosity towards certain subjects, objects, or activities, driving the motivation to learn or be involved.