A Portfolio Combining Two Assets with Less Than Perfectly Positive

question 1

True/False

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:

Independent Variables

Factors in an experiment that are intentionally changed to observe their effect on dependent variables.

Placebo

A compound that does not have any healing properties, employed as a standard in evaluating new medications.

Demand Characteristics

Demand characteristics refer to the subtle cues or signals that can influence participants’ behavior in experiments, biasing the results.

Representative

Someone who acts or speaks on behalf of others, often in a professional setting or within legislative bodies.