If Two Assets with Return on Correlation Coefficients of Less

question 10

True/False

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

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Definitions:

Law of Comparative Advantage

A principle that states that countries or individuals gain by producing goods for which they have a lower opportunity cost relative to other producers, leading to more efficient global resource allocation.

Economic Goods

Products or services that have a price and are consumed by individuals or groups to satisfy needs or wants.

Opportunity Cost Producer

The cost incurred by a producer when choosing one production opportunity over another, measured in terms of the benefit forgone from the alternative not chosen.

Comparative Advantage

The ability of a country, individual, company, or region to produce a good or service at a lower opportunity cost than competitors.