- CFA Exams
- CFA Level I Exam
- Study Session 18. Portfolio Management (1)
- Reading 52. Portfolio Risk and Return: Part I
- Subject 5. Portfolio Risk

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**CFA Practice Question**

Which of the following correlation coefficients would most effectively reduce the risk of a portfolio?

A. -1

B. 0

C. -2

**Explanation:**Correlation coefficients: the measurement of joint movement between two variables.

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**User Contributed Comments**
2

User |
Comment |
---|---|

JCopeland |
0 would reduce the risk as well. Although, a correlation coefficent of -1 would reduce risk to the rf rate (assuming equal weight with the portfolio) -2 is not possible |

Jurrens |
possible with leverage |