The purpose of adding an asset with a negative or low positive beta to a portfolio is to ________.
A)reduce profit
B)reduce risk
C)increase profit
D)increase risk

Question

Quizplus · Accepted Answer

Adding an asset with a negative or low positive beta to a portfolio can help reduce its overall risk. Betas measure the volatility of an investment in comparison to the market, and a negative or low positive beta indicates that the asset is less likely to move in the same direction as the overall market. By adding such an asset to a portfolio, investors can potentially reduce the impact of market fluctuations and thus lower the portfolio's overall risk.

The Purpose of Adding an Asset with a Negative or Low