For a two-stock portfolio,what would be the preferred correlation coefficient between the two stocks?
A) +1.00.
B) +0.50.
C) 0.00.
D) -1.00.
E) none of these.

Name: For a two-stock portfolio,what would be the preferred correlation coefficient between the two stocks? A) +1.00. B) +0.50. C) 0.00. D) -1.00. E) none of these.
Brand: Quizplus
Rating: 4.9 (33 reviews)

Question

Quizplus · Accepted Answer

A correlation coefficient of -1.00 is preferred for diversification benefits, as it indicates that the stocks move in exactly opposite directions, reducing overall portfolio risk.

For a Two-Stock Portfolio,what Would Be the Preferred Correlation Coefficient