Less than perfect positive correlation between returns on two stocks means that if we plot the returns of one stock against the other, the paired points on the graph would Select one: a. have a positive slope, with all the points lying exactly on a single line. b. have a positive slope of one. c. have a positive slope of less than one. d. have a positive slope, but not all the points would lie exactly on a single line. e. represent none of the above.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
11-4
Less than perfect positive correlation between returns on two stocks means that if we plot the returns of one stock against the other, the paired points on the graph would
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