Stocks with equal stand-alone risk can have opposite risk impacts on a portfolio because of the timing of the variations in their returns.

Question

Quizplus · Accepted Answer

Even though stocks may have the same stand-alone risk, their returns may vary at different times. This can result in one stock having a positive impact on the portfolio while the other may have a negative impact, depending on the timing of their returns. Therefore, stocks with equal stand-alone risks can have opposite risk impacts on a portfolio.

Stocks with Equal Stand-Alone Risk Can Have Opposite Risk Impacts