Which of the following is correct?
A) Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market.
B) Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation.
C) Your optimal portfolio is an efficient portfolio with your desired risk level.
D) All of the statements are correct.

Question

Quizplus · Accepted Answer

All of the statements are correct. 
A) Investing in international stocks can help investors diversify their portfolios and reduce the overall risk because international stocks tend to have low correlation with domestic stocks.
B) Combining stocks and bonds can reduce risk because the two assets have low correlation with each other. When stocks perform poorly, bonds tend to perform better, and vice versa.
C) An optimal portfolio is one that maximizes returns while minimizing risk, and this can be achieved by constructing an efficient portfolio with the desired level of risk tolerance.

Which of the Following Is Correct