If two events are positively correlated but not perfectly correlated, then A. diversification is not necessary since there is no risk. B. diversification does not reduce risk at all. C. diversification eliminates all risk. D. diversification can reduce risk.

Question

Business

Lane Luna

3 June, 18:28

If two events are positively correlated but not perfectly correlated, then A. diversification is not necessary since there is no risk. B. diversification does not reduce risk at all. C. diversification eliminates all risk. D. diversification can reduce risk.

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Answers (1)

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Bud · Answer 1

D. diversification can reduce risk.

Explanation:

Correlation are generally found in different spheres of life, they play roles in our total being activities and are also seen in our businesses. In businesses they are explained to be our approach to every form of investments that we delve in or have soaked our finances in and its results. This comes in positive and negative correlations. The positive is importantly discussed here because when two events are correlated positively but not perfectly, diversification reduces the risk. But this is not so in the negative form as the diversification in the negative terminates the risk.