Asked by Michael Brazis on Jul 21, 2024
Verified
If relevant events are _____,diversification will NOT reduce risk.
A) positively correlated
B) negatively correlated
C) dependent
D) independent
Positively Correlated
Describes a relationship between events such that each event is more likely to occur if the other event also occurs.
Diversification
Diversification is an investment strategy that involves spreading investments across various assets to reduce risk and increase the potential for returns.
- Describe the impact of correlated and independent risks on investment strategies and lowering risk levels.
Verified Answer
LT
Lamar TossilsJul 25, 2024
Final Answer :
A
Explanation :
When relevant events are positively correlated, diversification will not reduce risk. This is because when one asset is negatively affected by a relevant event, other assets in the portfolio are also likely to be negatively affected.
Learning Objectives
- Describe the impact of correlated and independent risks on investment strategies and lowering risk levels.