Even if assets are not negatively correlated, lower the positive correlation between them, the lower the resulting risk.

Question

Quizplus · Accepted Answer

This statement is true. When assets are positively correlated, they tend to move in the same direction, which increases their overall risk. However, if the assets are less positively correlated or even uncorrelated, their movements are less likely to be correlated and there is less risk of them moving in the same direction at the same time. Therefore, the lower the positive correlation between assets, the lower the resulting risk.

Even If Assets Are Not Negatively Correlated, Lower the Positive