Asked by
Hailey Martinez
on Oct 20, 2024
Verified
Investing in two assets with a correlation coefficient of 1 will reduce which kind of risk?
A) market risk
B) unique risk
C) unsystematic risk
D) none of these options (With a correlation of 1, no risk will be reduced.)
Correlation Coefficient
An analytical value assessing the magnitude and pathway of a linear linkage between a pair of variables.
Market Risk
The potential for investment losses stemming from elements that impact the general functioning of the financial markets.
Unique Risk
The risk specific to an individual investment or small group of investments, often reducible through diversification.
- Understand thoroughly the concept of correlation and how it dictates the risk profile of a portfolio.
- Explain the concept of systematic and unsystematic risk and their impact on investment.
Verified Answer
SA
Learning Objectives
- Understand thoroughly the concept of correlation and how it dictates the risk profile of a portfolio.
- Explain the concept of systematic and unsystematic risk and their impact on investment.
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