One of the solutions to a question on the CFA mock read - "Combining assets that are not perfectly correlated reduces the risk of the portfolio as measured my standard deviation, as measured by the standard deviation."
I understand that as the correlation between two assets decreses, the benefits of diversification increases. But I am wondering if an addition of a less that perfectly positive correlated security to a portfolio will reduce the absolute risk of the portfolio or if the portfolio risk (stnd dev) will increase by less than the risk of the additional security? Or does that explanation apply to assets with positive correlations that less than perfectly correlated, while assets that are negatively correlated can reduce the overall risk of the portfolio when combined? Hope this makes sense. |
发表于 2011-7-11 15:11
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