Which Type of Correlation Will a Completely Diversified Portfolio Have

question 29

Multiple Choice

Which type of correlation will a completely diversified portfolio have with the market portfolio?

• A)less than one, because it carries only market risk
• B)less than one, because it carries only diversifiable risk
• C)equal to one, because it carries only diversifiable risk
• D)equal to one, because it carries only market risk

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Definitions:

Cognitive Complexity

A psychological characteristic wherein an individual's thinking processes are more nuanced, multifaceted, and layered, enabling a deeper understanding of complex concepts.

Cognitive Processes

The cognitive activities or operations involved in gaining comprehension and knowledge through reasoning, experiences, and sensory perception.

Construe an Experience

The process of interpreting and understanding an event or situation from a personal perspective, often influenced by one's beliefs and biases.

Cognitive Movement

Refers to the progression or development in mental processes that enable understanding, learning, problem-solving, and memory.