You have a portfolio of two risky shares which turns out to have no diversification benefit.The reason you have no diversification is the returns:
A)are too small.
B)move perfectly opposite of one another.
C)are too large to offset.
D)move perfectly with one another.
E)are completely unrelated to one another.

Question

Quizplus · Accepted Answer

When two shares move perfectly with one another, they have a correlation of +1, indicating that their returns move in perfect tandem. This means that holding both shares does not provide any diversification benefit, as the risks associated with both shares will be the same, and they will not offset each other.

You Have a Portfolio of Two Risky Shares Which Turns