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The correlation coefficient: 1. Shows a stronger relationship between the returns of 2 securities when its absolute value is closer to 0. 2. Provides the
The correlation coefficient:
1. Shows a stronger relationship between the returns of 2 securities when its absolute value is closer to 0.
2. Provides the greatest diversification benefits for a given portfolio when at least 2 securities in the portfolio have a correlation coefficient equal to -1.
3. As long as pAB = 0.1 (correlation), an equally weighted portfolio which only consist of stock A and stock B would always be risk-free
A) 1 is correct
B) 2 is correct
C) 1 and 2 are correct
D) 1 and 3 are correct
E) 2 and 3 are correct
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