The Covariance Between the Returns on Two Assets Is Negative

question 8

Multiple Choice

The covariance between the returns on two assets is negative. This occurs when ________.

• A) the variance of one asset has a negative linear relationship with the variance of the other asset
• B) the standard deviation of one asset has a positive linear relationship with the standard deviation of the other asset
• C) on average, the return on one asset is below its expected value and the return on the other asset is above its expected value
• D) on average, the return on one asset is below its expected value and the return on the other asset is below its expected value

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