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kenny6666 [7]
3 years ago
12

A two-asset portfolio with a standard deviation of zero can be formed when Group of answer choices the assets have a correlation

coefficient equal to negative one. the assets have a correlation coefficient equal to zero. the assets have a correlation coefficient less than zero. the assets have a correlation coefficient greater than zero. the assets have a correlation coefficient equal to one.
Business
1 answer:
Ulleksa [173]3 years ago
6 0

Answer:

the assets have a correlation coefficient equal to negative one.

Explanation:

Portfolio variance can be defined as the measurement of risk or dispersion of returns of a set of securities that makes up a portfolio fluctuate over a period of time.

Simply stated, portfolio variance is typically the total returns of the portfolio over a specific period of time.

In order to calculate the portfolio variance, the standard deviations of each security in the portfolio with their respective correlations security pair in the portfolio would be used. Portfolio variance is the square of standard deviation.

A two-asset portfolio with a standard deviation of zero can be formed when the assets have a correlation coefficient equal to negative one (-1) because this defines the efficiency frontier. In Economical portfolio theory, the efficient frontier is a group of optimal portfolios that offers an investor the highest expected return for a specific risk level or offers the lowest risk for a defined level of expected return.  

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