In a portfolio consisting of two perfectly negatively correlated securities, the highest attainable expected return will consist of a portfolio containing 100% of the asset with the highest expected return.

Question

Quizplus · Accepted Answer

When two securities are perfectly negatively correlated, combining them can eliminate risk, but the highest expected return is achieved by investing entirely in the asset with the highest expected return.

In a Portfolio Consisting of Two Perfectly Negatively Correlated Securities