When the Correlation Between Two Assets Is Exactly $- 1$ , Which of the Following Statements Is True?
A) the

question 3

Multiple Choice

When the correlation between two assets is exactly $- 1$ , which of the following statements is true?

• A) The hedge ratio is positive.
• B) The hedge ratio is zero.
• C) The variance of the hedged position is maximized.
• D) There is no basis risk in hedging.

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Definitions:

Scatterplot

A graphical representation in which two variables are plotted along two axes, helping to show the relationship between them.

Positive

Characterized by or displaying affirmation, agreement, or constructive qualities or results.

Relationship

How two or more ideas, objects, or persons are related, or the status of being in relation.

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two variables.