Question: Portfolio diversification reduces variability because stock prices: Multiple Choice are perfectly negatively correlated so an increase in one is perfectly offset by a decrease in

Portfolio diversification reduces variability because stock prices:

Multiple Choice

are perfectly negatively correlated so an increase in one is perfectly offset by a decrease in another.

are uncorrelated so there is no relationship between returns of different stocks.

tend to be negatively correlated so changes in one stock are almost completely offset by changes in other stocks.

are perfectly correlated so there is no variability between stocks.

do not move exactly together, so changes in one stock are partially offset by changes in other stocks.

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