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While stock markets provide investors with significant returns over the long run, rare but unanticipated disasters cause severe short - term losses. One common practice
While stock markets provide investors with significant returns over the long run, rare but unanticipated disasters cause severe shortterm losses. One common practice used to manage risk is portfolio diversification. The literature employs the magnitude and sign of the crossasset correlation to classify assets into three levels: diversifiers, hedges, and safe havens. First, review the literature to define each asset. Next, propose four safehaven assets against stock risk and explain why their correlation to stock markets is negative.
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