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In an equally-weighted two stock portfolio, if the correlation coefficient between two stocks were to become -1 over time, everything else remaining constant, the portfolio's
In an equally-weighted two stock portfolio, if the correlation coefficient between two stocks were to become -1 over time, everything else remaining constant, the portfolio's risk in theory would:
Decrease. | ||
Remain constant. | ||
Increase. | ||
Eliminate almost 100% and portfolio becomes risk-free. |
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