Theoretically, what is the correlation coefficient between a completely diversified portfolio and the market portfolio?
A) -1.0
B) +1.0
C) 0.0
D) -0.5
E) +0.5

Question

Quizplus · Accepted Answer

A completely diversified portfolio theoretically has the same risk as the market, thus its movements are perfectly correlated with the market portfolio, leading to a correlation coefficient of +1.0.

Theoretically, What Is the Correlation Coefficient Between a Completely Diversified