Which of the following correlation coefficients will produce the least diversification benefit?
A) -.6
B) -.3
C) 0
D) .8

Question

Quizplus · Accepted Answer

A correlation coefficient of 0 indicates complete diversification benefit, while negative correlation coefficients (such as -.6 or -.3) indicate some level of diversification benefit. A positive correlation coefficient (such as .8) indicates that the assets are moving in the same direction, therefore providing the least diversification benefit.

Which of the Following Correlation Coefficients Will Produce the Least