Part $2.$ To maximize return, investors use diversification. Holding assets that are not highly correlated reduces the portfolio risk with respect to asset price movements. Diamond commodities are distinguished from other portfolio securities by having a low, often negative correlation with many traditional investments. The table below shows gold & diamond portfolio values $($total monetary values of the gold and diamonds assets in investment portfolio$)$ of one Canadian investor measured at certain time points. It is important to note that the investor did not sell or buy gold or diamonds over the period in question, which makes the analysis objective and unbiased. The table values are in $$1000$ CAN; DVALUE column contains diamond values; GVALUE shows the gold values.

DVALUE GVALUE

$262237$

$231251$

$201135$

$258240$

$157271$

$244167$

$264219$

$137235$

$227207$

$208127$

$255120$

$253181$

$172159$

$284144$

$215141$

$214228$

$242223$

$209132$

$263177$

$265184$

$216185$

$248176$

$219178$

$130278$

$243146$

$211208$

$226197$

$176289$

$186190$

$235123$

Perform the correlation analysis.

The coefficiSelect the most appropriate conclusion. Note: Estimation of the strength of correlation varies between fields and types of research, variables measured, and sample sizes. Please, consider the linear correlation weak$/$low if the absolute value of correlation coefficient is less or equal to

$0\mathrm{.}3$

$-$Diamonds have low and negative historical correlation to gold asset. I think that the portfolio with diamonds and gold would be perfectly$-$diversified.

$-$Diamonds and gold are not low$-$correlated. I do not think that the portfolio with diamonds and gold would be diversified enough.

$-$Diamonds have low and positive historical correlation to gold asset. I think that the portfolio with diamonds and gold would be well$-$diversified.

$-$The absolute value of the correlation coefficient is close to zero. It means that the diamonds and gold are highly correlated. Thus, the investor's portfolio is perfect.

$-$The absolute value of the correlation coefficient is close to $1.$ It means that the diamonds and gold are low correlated. Thus, the investor should consider different options, for example, diamonds and bonds.