In Order to Diversify Risk an Investor Must Have Investments

question 12

Multiple Choice

In order to diversify risk an investor must have investments that have correlations with other investments in the portfolio that are

• A) low positive
• B) zero
• C) negative
• D) any of the above
• E) none of the above

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Definitions:

Standard Deviation

A gauge for the extent of variability or scatter among a group of numbers, highlighting the deviation of these values from their average.

Mean

The average of a set of numerical values, calculated by summing them together and then dividing by the number of observations.

Standard Normal

A normal distribution with a mean of 0 and a standard deviation of 1.

Random Variable

A random variable represents numerical outcomes of random phenomena or experiments, varying in value based on the outcomes of the process.