If the Correlation Between Two Stocks Is +1, Then a Portfolio

question 60

Multiple Choice

If the correlation between two stocks is +1, then a portfolio combining these two stocks will have a variance that is:

• A) less than the weighted average of the two individual variances.
• B) greater than the weighted average of the two individual variances.
• C) equal to the weighted average of the two individual variances.
• D) less than or equal to average variance of the two weighted variances, depending on other information.

---

Definitions:

Epiglottitis

A potentially life-threatening condition characterized by inflammation of the epiglottis, leading to severe difficulty in breathing.

Laryngotracheobronchitis

An inflammatory condition of the larynx, trachea, and bronchi, commonly called croup, mainly affecting young children and leading to breathing difficulties.

Medical Emergency

A serious and unexpected situation requiring immediate medical attention to prevent death or severe harm.

Acute Respiratory Distress Syndrome

A severe lung condition characterized by rapid onset of widespread inflammation in the lungs, leading to respiratory failure.