The Covariance Between the Returns on Two Assets Is Negative

question 8

Multiple Choice

The covariance between the returns on two assets is negative. This occurs when ________.

• A) the variance of one asset has a negative linear relationship with the variance of the other asset
• B) the standard deviation of one asset has a positive linear relationship with the standard deviation of the other asset
• C) on average, the return on one asset is below its expected value and the return on the other asset is above its expected value
• D) on average, the return on one asset is below its expected value and the return on the other asset is below its expected value

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Definitions:

Avoiding (Withdrawal)

A communication strategy where one intentionally avoids or withdraws from interaction to evade conflict or uncomfortable situations.

Communication Skills

The ability to convey or share information effectively with others.

Destructive Escalations

Situations where conflicts or problems worsen significantly due to adverse reactions or interventions.

A-type Conflict

Task-oriented conflict, focusing on disagreements about the content and outcomes of a task being performed, rather than personal issues.