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:

Legitimate Power

Legitimate power is the capacity to influence other people by virtue of formal authority, or the rights of office.

Cost-Benefit Value

The evaluation of the advantages (benefits) and disadvantages (costs) associated with a particular action or decision.

Managing Planned Change

Managing planned change involves the systematic process of implementing new methods, practices, or directions within an organization to improve efficiency or adapt to new market conditions.

People's Tendencies

People's tendencies describe habitual patterns or inclinations in behavior, thought, or emotion that are characteristic among individuals across various situations.