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Which of the following statement about the two-asset portfolio diversification is correct? 1. The higher the correlation of assets in the portfolio, the more diversification

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Which of the following statement about the two-asset portfolio diversification is correct? 1. The higher the correlation of assets in the portfolio, the more diversification of the portfolio. II. When the two assets are perfectly positively correlated, there is no diversification effect. III. When the two assets are perfectly negatively correlated, we can construct a risk free portfolio IV. When the two assets are not correlated at all, there is no diversification effect

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