Which of the following statements is correct?
A) Uncorrelated assets have a correlation of −1.0.
B) Most common stocks are positively correlated with each other because they are impacted by the same economic factors.
C) We can typically add many stocks together to fully eliminate the market risk in a portfolio.
D) None of these choices are correct.

Question

Quizplus · Accepted Answer

Most common stocks tend to move in the same direction because they are influenced by overall economic factors, such as interest rates, inflation, and GDP growth, which leads to a positive correlation among them.

Which of the Following Statements Is Correct