If Two Assets with Return Correlation Coefficients Less Than One

question 13

True/False

If two assets with return correlation coefficients less than one make up a portfolio, then the portfolio does not take advantage of any diversification benefits.

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of another entity without controlling it.

Investment Account

An account held at a financial institution that contains securities, cash, and other assets that an individual or entity invests in.

Purchase Price Discrepancy

Differences between the provisional purchase price initially recorded at the time of acquisition and the final purchase price determined after valuation adjustments.

Equity Method

An accounting technique used to assess the profits earned by investments in other companies, reflecting the income on the investor's income statement.