Which of the following correlation coefficients will produce the most diversification benefits?
A) -.6
B) -.9
C) 0
D).4

Question

Quizplus · Accepted Answer

A correlation coefficient of -.9 represents a strong negative correlation, which indicates that the two assets are likely to move in opposite directions. This means that including an asset with a correlation coefficient of -.9 will provide the most diversification benefits to a portfolio.

Which of the Following Correlation Coefficients Will Produce the Most