Which of the following statements is CORRECT? Question 10 options: All are corre
ID: 2658465 • Letter: W
Question
Which of the following statements is CORRECT?
Question 10 options:
All are correct.
It is possible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
The lower the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
An investor can NOT eliminate ALL market risk even if he or she holds a very large and well diversified portfolio of stocks.
All are correct.
It is possible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
The lower the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
An investor can NOT eliminate ALL market risk even if he or she holds a very large and well diversified portfolio of stocks.
Explanation / Answer
All are correct.
Th market risk of a single stock can be lower than that of the portfoio that includes the stock.
A lower correlation between the stockds will reduce the risk of the portfolio as teh portfolio is not exposed to a single category of stocks having same type of risks.
Market risk cannot be eliminated holding a diversified portfolio. Market risk affect all the stocks in the economy.
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