Even If the Correlation Between the Returns on Two Securities

question 34

True/False

Even if the correlation between the returns on two securities is +1.0, if the securities are combined in the correct proportions, the resulting 2-asset portfolio will have less risk than either security held alone.

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Definitions:

Accidental

An unexpected and unintentional event that causes damage or injury.

Indorser

An alternative spelling of "endorser," referring to a person who signs a document (often a negotiable instrument) to endorse it, thereby assuming responsibility under certain conditions.

Subsequent Holder

An individual or entity that lawfully receives possession or control of a negotiable instrument, such as a check or promissory note, after it has been issued.

Honor

A principle that drives individual conduct to embody integrity, respect, and ethical behavior.