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

Question

Quizplus · Accepted Answer

This statement is true. When assets have a low correlation, they tend to move independently from each other, which means that losses in one asset are less likely to be offset by gains in another. As a result, the risk of the overall portfolio is lower because it is less dependent on the performance of any one asset.

Even If Assets Are Not Negatively Correlated,the Lower the Correlation