If any two assets are perfectly negatively correlated, an equal weighted portfolio of these two assets...
- If any two assets are perfectly negatively correlated, an equal weighted portfolio of these two assets will result in a Portfolio return of zero [TRUE:FALSE]
Homework Answers
If any two assets are perfectly negatively correlated, an equal-weighted portfolio of these two assets will result in a Portfolio return of zero.
The statement is TRUE.
Let's say the two assets are A & B and if they are perfectly negatively correlated, then it means that if asset A returns 10%, then asset B returns -10%
If we put 50% of our money in each of these assets, then the return of this portfolio = 0
Return = 0.5 * 0.10 + 0.5 * (-0.10)
Return = 0%
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