The returns on Asset A are strongly,positively correlated with Asset B's returns;thus,holding the two assets together will
A)significantly reduce portfolio risk.
B)significantly increase portfolio risk.
C)have little or no effect on portfolio risk.
D)significantly increase portfolio return.

Question

Quizplus · Accepted Answer

When two assets are strongly positively correlated, they tend to move in the same direction, which means that combining them will not significantly reduce portfolio risk.

The Returns on Asset a Are Strongly,positively Correlated with Asset