Two Investments That Have a Correlation Coefficient of -1 Will

question 66

Multiple Choice

Two investments that have a correlation coefficient of -1 will have a portfolio standard deviation of _____________.

• A)-1
• B)0
• C)+.5
• D)+1

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Definitions:

Opportunity Cost

Opportunity cost is the cost of foregoing the next best alternative when making a decision, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Truck

A motor vehicle designed to transport cargo or goods.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than its competitors, leading to more efficient trade.

Absolute Advantage

The capability of a country, entity, or individual to produce a good or service more efficiently than competitors, using fewer resources.