Question

A portfolio contains equal weights of two securities having the same standard deviation. If the correlation between the returns of the two securities was to decrease, the portfolio risk would most likely:

Answer 1

Answer:

Step-by-step explanation:

Portfolio variance is a measurement of risk, of how the aggregate actual returns of a set of securities making up a portfolio fluctuate over time. This portfolio variance statistic is calculated using the standard deviations of each security in the portfolio as well as the correlations of each security pair in the portfolio.