Question: Consider the following two statements: The diversification effect decreases with the correlation of the stocks within the portfolio. The standard deviation of a portfolio of

Consider the following two statements: The diversification effect decreases with the

Consider the following two statements: The diversification effect decreases with the correlation of the stocks within the portfolio. The standard deviation of a portfolio of two securities is always less than the weighted average of the standard deviations of the individual securities. Which of the following is correct? Statement I is incorrect, Statement II is incorrect Statement I is correct, Statement II is correct Statement I is correct, Statement II is incorrect Statement I is incorrect, Statement Il is correct

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