Consider an underlying asset U$.$ There is no direct futures contract on U$.$ Hence, you are going to use other futures

contracts instead t o hedge the risk of adverse price movements in the underlying asset U$.$ Your assistant provided four

candidate futures contracts, F$,$ G$,$ H$,$ L and M with the correlation coefficients of changes in prices to U$.$ Which is the best

candidate for the cross hedge?

$$ Correlation coefficient between U and F $=0.$

$$ Correlation coefficient between U and G $=-0\mathrm{.}9.$

$$ Correlation coefficient between U and H $=-1.$

$$ C o r r e l a t i o n c o e f fi c i e n t b e t w e e n U a n d L $=0\mathrm{.}8.$

$$ Correlation coefficient between U and M $=+1.$

$$ H or M;

$$ H only;

$$ L only;

$$ G only;

$$ Fonly;