Two assets whose returns move in the opposite directions and have a correlation coefficient of -1 ar either risk-free assets or low-risk assets.

Question

Quizplus · Accepted Answer

A correlation coefficient of -1 between two assets' returns indicates perfect negative correlation, meaning they move in opposite directions, but this does not inherently make them risk-free or low-risk assets. The risk of each asset depends on its own volatility and other factors, not just the correlation between them.

Two Assets Whose Returns Move in the Opposite Directions and Have