Question
The table below shows correlations between different asset classes. Small Cap Equity Large Cap Equity International Equity Emerging Mkt. Equity Small Cap Equity 1 Large
The table below shows correlations between different asset classes.
| Small Cap Equity | Large Cap Equity | International Equity | Emerging Mkt. Equity |
Small Cap Equity | 1 |
|
|
|
Large Cap Equity | 0.67 | 1 |
|
|
Inter. Equity | 0.45 | 0.95 | 1 |
|
Emer. Mkt. Equity | 0.43 | 0.83 | 0.37 | 1 |
Which portfolio would you prefer among the ones below (no calculation needed), briefly explain why:
A. A share portfolio consisting of International Equity and Large Cap Equity
B. A share portfolio consisting of Small Cap Equity and Large Cap Equity
C. A share portfolio consisting of Emerging Mkt. Equity and International Equity
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