Question: the correlation coefficient: 1. shows a stronger relationship between the returns of two securities when its absolute value is closer to 0 2. provides the

the correlation coefficient:

1. shows a stronger relationship between the returns of two securities when its absolute value is closer to 0

2. provides the greatest diversification benefits for a given portfolio when at least two securities in the portfolio have a correlation coefficient equal to -1

3. as long as PAB = -1 (correlation), an equally weighted portfolio which only consists of stock A and stock B would always be risk free

a. only 1 is correct

b. only 2 is correct

c. both 1 and.2 are correct

d. both 1 and 3 are correct

e. both 2 and 3 are correct

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