Correlation has ________ effect on the expected return of a portfolio.
A) a positive
B) zero
C) a negative
D) none of the above

Question

Quizplus · Accepted Answer

Correlation does not directly affect the expected return of a portfolio. The expected return is primarily determined by the weighted average of the expected returns of the individual assets in the portfolio, not by how those assets' returns correlate with each other.

Correlation Has ________ Effect on the Expected Return of a Portfolio