If you are trying to adequately diversify your portfolio, you would want to avoid investing in stocks that were
A) highly negatively correlated.
B) not at all correlated.
C) highly positively correlated.
D) in different regions of the world.

Question

Quizplus · Accepted Answer

Highly positively correlated stocks move in the same direction under the same market conditions, which means if one stock in the portfolio declines, the others are likely to do so as well, reducing the benefits of diversification. Diversification aims to spread risk across different investments, so having stocks that react similarly to market changes does not achieve this goal.

If You Are Trying to Adequately Diversify Your Portfolio, You