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Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum-variance portfolio has a standard deviation that is always ________.
A) equal to the sum of the securities' standard deviations
B) equal to -1
C) equal to 0
D) greater than 0
Global Minimum-Variance Portfolio
The Global Minimum-Variance Portfolio is an investment portfolio constructed to achieve the lowest possible level of risk (variance) for its expected return, using assets from around the world.
Perfectly Negatively Correlated
A relationship between two securities in which one's price moves in the opposite direction of the other's, resulting in a correlation coefficient of -1.
Standard Deviation
A statistical measure of the dispersion or variability of a set of data points, often used in finance to quantify the risk of an investment.
- Grasp the key ideas of expected return and risk associated with portfolio theory.
- Learn about the core concepts of diversification and its consequences on the level of risk within a portfolio.
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Learning Objectives
- Grasp the key ideas of expected return and risk associated with portfolio theory.
- Learn about the core concepts of diversification and its consequences on the level of risk within a portfolio.
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