Which of the following statements is correct?
A)Uncorrelated assets have a correlation of -1.0.
B)Most common stocks are positively correlated with each other because they are impacted by the economic factors.
C)We can typically add many stocks together to fully eliminate the market risk in a portfolio.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

Uncorrelated assets have a correlation of 0, not -1.0. Most common stocks are positively correlated with each other due to their exposure to economic factors. It is not possible to fully eliminate market risk in a portfolio by adding many stocks together as all stocks are impacted by market movements.

Which of the Following Statements Is Correct