Which of the following securities could NOT have any benefits for diversificatio
ID: 2736697 • Letter: W
Question
Which of the following securities could NOT have any benefits for diversification with your investment portfolio?
Treasury bills with a correlation coefficient of 0.0 with your portfolio
Alpha Company stock that has a correlation coefficient of -0.25 with your portfolio
Beta Company stock that has a correlation coefficient of 0.50 with your portfolio
All of these choices would reduce risk for your portfolio and therefore show at least some benefit to diversification.
A.Treasury bills with a correlation coefficient of 0.0 with your portfolio
B.Alpha Company stock that has a correlation coefficient of -0.25 with your portfolio
C.Beta Company stock that has a correlation coefficient of 0.50 with your portfolio
D.All of these choices would reduce risk for your portfolio and therefore show at least some benefit to diversification.
Explanation / Answer
Beta Company stock that has a correlation coefficient of 0.50 with your portfolio
When correlation is positive then there would be increase in the diversfication
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