Which of the following statements about portfolio theory is TRUE?
Click on the arrows to vote for the correct answer
A. B. C. D.B
Markowitz was the first to identify this. The lack of perfect positive or negative correlation gives rise to the efficient frontier shape.
Covariance is a measure of movement, not of risk. A correlation coefficient of zero means that the returns are uncorrelated. A correlation coefficient of negative one means that risk can go to zero. Adding a security with a correlation coefficient of zero may reduce risk, but risk will not be eliminated. Risk increases as the correlation coefficient goes from ""1 to +1. Risk decreases as the correlation coefficient goes from +1 to -1.