Which of the following statements is correct?
A) Uncorrelated assets have a correlation of -1.0.
B) Most common stocks are positively correlated with each other because they are impacted by the economic factors.
C) We can typically add many stocks together to fully eliminate the market risk in a portfolio.
D) None of these statements are correct.

Question

Quizplus · Accepted Answer

Option A is incorrect because uncorrelated assets have a correlation coefficient of 0, not -1. Option C is incorrect because adding many stocks will diversify unsystematic risk, but not market risk. Option D is not applicable since option B is correct. Common stocks are positively correlated due to the influence of macroeconomic factors.

Which of the Following Statements Is Correct