Which of the following is correct?
A)Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market.
B)Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation.
C)Your optimal portfolio is an efficient portfolio with your desired risk level.
D)All of these statements are correct.

Question

Quizplus · Accepted Answer

All of the statements are correct.

A) Investing in international stocks can indeed reduce the risk in a portfolio since they tend to have low correlation with our own stock market, therefore reducing overall portfolio risk.

B) Combining stocks and bonds is a common strategy for diversification, as these two assets classes have historically shown low correlation with each other. Therefore, their combination helps to reduce overall portfolio risk.

C) The optimal portfolio is the one that maximizes returns for a given level of risk, or alternatively, minimizes the level of risk for a given level of returns. This portfolio will vary depending on each investor's risk tolerance and goals.

Which of the Following Is Correct