If the Returns on Two Assets Are Negatively Correlated, Then

question 6

True/False

If the returns on two assets are negatively correlated, then a portfolio that contains some of each will have less variance in its return per dollar invested than either asset has by itself.

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Definitions:

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, considering the risk associated.

Dividend Yield

A metric illustrating the annual dividends paid by a firm as a proportion of its share price, typically represented as a percentage.

Equilibrium

A state in which market supply and demand balance each other, and as a result, prices become stable.

Preferred Stockholders

Investors who own shares that typically do not have voting rights but have a higher claim on assets and earnings than common stockholders, such as receiving dividends before them.