Which is true with regards to the systematic and unsystematic risk? To mitigate the unsystematic risk, an investor must choose two stocks that has a perfectly negative correlation when establishing ones portfolio of securities A portfolio with stocks that has high Sharpe ratios does not have both unsystematic and systematic risk because then generate excess returns The likes of inflation, recession, changes in interest rates are examples of market risk that can be reduced to zero by a portfolio that is fully diversified Systematic risk can be diversified by choosing stocks that has a small standard deviation but high correlation coefficient since these stocks are less riskier
Which is true with regards to the systematic and unsystematic risk? To mitigate the unsystematic risk, an investor must choose two stocks that has a perfectly negative correlation when establishing ones portfolio of securities A portfolio with stocks that has high Sharpe ratios does not have both unsystematic and systematic risk because then generate excess returns The likes of inflation, recession, changes in interest rates are examples of market risk that can be reduced to zero by a portfolio that is fully diversified Systematic risk can be diversified by choosing stocks that has a small standard deviation but high correlation coefficient since these stocks are less riskier
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which is true with regards to the systematic and unsystematic risk?
To mitigate the unsystematic risk, an investor must choose two stocks that has a perfectly negative correlation when establishing ones portfolio of securities
A portfolio with stocks that has high Sharpe ratios does not have both unsystematic and systematic risk because then generate excess returns
The likes of inflation, recession, changes in interest rates are examples of market risk that can be reduced to zero by a portfolio that is fully diversified
Systematic risk can be diversified by choosing stocks that has a small standard deviation but high correlation coefficient since these stocks are less riskier
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