Consider the Characteristics of the Following Three Stocks

question 16

Multiple Choice

Consider the characteristics of the following three stocks:
The correlation between Thumb Devices and Air Comfort is -0.12.The correlation between Thumb Devices and Sport Garb is 0.89.The correlation between Air Comfort and Sport Garb is -0.85.If you can pick only two stocks for your portfolio,which would you pick? Why?

• A)Combine Thumb Devices and Sport Garb because they have a high correlation.
• B)Combine Thumb Devices and Air Comfort because of high standard deviations.
• C)Combine Air Comfort and Sport Garb due to negative correlation.
• D)Combine Thumb Devices and Sport Garb because Thumb Devices has the highest return and Sport Garb has the lowest standard deviation.

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Definitions:

Engorging

The process of being filled with blood, often used in the context of sexual arousal.

Eating Disorder

A range of psychological disorders characterized by abnormal or disturbed eating habits, which negatively affect a person's health.

Compulsive Overeating

An eating disorder characterized by periods of uncontrollable, excessive eating beyond the point of feeling comfortably full.

Binge Eating

A pattern of disordered eating which consists of episodes of uncontrollably eating large quantities of food in a short period of time.