CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

By adding stocks that are less than perfectly correlated with existing stocks in a portfolio, you ______
A. can eliminate all variability.
B. will retain market risk.
C. can eliminate variability due to macroeconomic factors.
Explanation: Adding stocks that are less than perfectly correlated with existing stocks in a portfolio will diversify away some, but not all, unsystematic risk. However, market or systematic risk will not be diversified away.

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