Mostly in financials, risk of portfolio is smaller than that of assets
A. mean
B. weighted average
C. mean correlation
D. negative correlation
Answer: Option B
Solution (By Examveda Team)
Mostly in financial, risk of portfolio is smaller than that of assets is weighted average. One of the most basic principles of finance is that diversification leads to a reduction in risk unless there is a perfect correlation between the returns on the portfolio investments. Owing to the diversification benefits, standard deviation of a portfolio of investments (stocks, projects, etc.) should be lower than the weighted average of the standard deviations of the individual investments.This Question Belongs to Commerce >> Financial Management
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