When looking at the correlation of a pair of assets, we say the correlation is weak (and therefore good for diversifcation) is

Question 1 options:

	if it is close to zero as long as it's positive
	it is highly positive
	if it is close to zero - whether negative or positive
	if it is highly negative

Question 2 (1 point)

In the simplified CAPM model, the dependent variable (that is, the Y variable) is

Question 2 options:

	The returns of the stock with the highest Sharpe Ratio
	The Market's return
	The difference between the asset's returns and the market's return
	The Asset's return

Question 3 (1 point)

When looking to replace a low performing stock in the portfolio, which attribute or value would NOT likely be effective?

Question 3 options:

	Its current price
	Its performance compared to the S&P
	Its sector performance compared to other sectors in the S&P
	Its correlation compared to the other stocks in the portfolio

Question 4 (1 point)

A beta less than one does not necessarily mean the risk is lower than the S&P because

Question 4 options:

	We need to also consider Alpha
	Beta does not measure risk
	Beta is just an estimate
	A Beta lower than one implies greater risk

Question 5 (1 point)

We can calculate the probability of an estimated statistic exceeding a certain value if we know

Question 5 options:

	its standard error
	its geometric mean
	its correlation with the S&P
	the sample size

Answer rating: 100% (QA)

QA for Portfolio Diversification and Modern Portfolio Theory 1 When looking at the correlation of a pair of assetswe say the correlation is weak and t... View the full answer