Which of the following statements is correct?
A)Uncorrelated assets have a correlation of -1.0.
B)Most common stocks is positively correlated with each other because they is 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

Uncorrelated assets have a correlation coefficient of 0, not -1. Most common stocks are positively correlated with each other as they are all affected by the general economic climate. We can reduce market risk in a portfolio by diversifying among many different assets, but we cannot fully eliminate it.

Which of the Following Statements Is Correct