Which of the following statements is incorrect?
A) Risk can be totally eliminated by diversification.
B) "Not putting all our eggs in the same basket" is an example of diversification.
C) Diversification is the reduction of risk by investing funds across several assets.
D) As long as the correlation between two assets returns is not perfect, positive, there is a benefit to combining assets into portfolios.

Question

Quizplus · Accepted Answer

Diversification can reduce but not totally eliminate risk. There are two types of risk: unsystematic risk, which can be diversified away, and systematic risk, which affects the entire market and cannot be eliminated through diversification.

Which of the Following Statements Is Incorrect