Question

Choose the correct code for the following statements being correct or incorrect.
Statement I : When the two securities returns are perfectly positively correlated, the risk of their portfolio is just a weighted average of the individual risks of the securities. In such a case, diversification does not provide risk reduction but only risk averaging.

Statement II : Total risk of a portfolio of two risk securities can be completely eliminated when their returns are perfectly negatively correlated and their proportionate holdings in the portfolio are inversely related to the relative individual risks of the securities.

Code :
(A) Statement II is correct, but I is incorrect
(B) Statement I is correct but II is incorrect
(C) Both the statements I and II incorrect
(D) Both the statements I and II correct
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Answer 1

Answer------


B is correct

Answer 2

a is correct bus incorrect