Combining two negatively correlated assets to reduce risk is known as ________.
A) diversification
B) valuation
C) securitization
D) risk aversion

Question

Quizplus · Accepted Answer

Combining two negatively correlated assets to reduce risk is the essence of diversification, which is a common strategy used by investors to manage risk in their portfolio. Valuation refers to the process of determining the value of an asset or security, while securitization refers to the process of converting an illiquid asset into a security. Risk aversion is a behavioral trait of individuals who prefer lower risk options even if the expected return is lower.

Combining Two Negatively Correlated Assets to Reduce Risk Is Known