Economics · Financial Management
Given below are two statements: One is labelled as Assertion (A) and the other is labelled as Reason (R). Assertion (A): If securities with less than perfect positive correlation between their price movements are combined, portfolio risk can be reduced significantly. Reason (R): The term with negative or lower correlation has the effect of reducing the computed value of total portfolio risk, given other terms that are positive. In the light of the above statements, choose the most appropriate answer from the options given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both (A) and (R) are correct and (R) is the correct explanation of (A).✓
- 2Both (A) and (R) are correct but (R) is NOT the correct explanation of (A).
- 3(A) is correct but (R) is incorrect.
- 4(A) is incorrect but (R) is correct.
Correct answer
Both (A) and (R) are correct and (R) is the correct explanation of (A).
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