The Creation of a Portfolio by Combining Two Assets Having

question 91

True/False

The creation of a portfolio by combining two assets having perfectly positively correlated returns cannot reduce the portfolio's overall risk below the risk of the least risky asset. On the other hand, a portfolio combining two assets with less than perfectly positive correlation can reduce total risk to a level below that of either of the components.

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Definitions:

Rigid Policies

Strict and inflexible rules or guidelines within an organization that dictate certain behaviors or procedures.

Overlearning

The practice of continuing to study or practice beyond what is necessary to master a skill, ensuring it can be performed effortlessly and automatically.

Complex Tasks

Complex tasks are activities that require multiple steps, skills, or decision points, often involving high levels of cognitive engagement and problem-solving.

Significant Pressure

The experience of considerable stress or force, often relating to demands, challenges, or expectations in one’s personal or professional life.