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Other things equal, when adding new securities to a portfolio, the lower (less positive) the correlation between the new secu

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The correlation refers to the ability to two securities to move in the same direction under various conditions, i.e. when two securities tend to move in the same direction, they are said to be positively correlated and vice-versa. More the correlation, more would be the similarity of their performance under a given set of conditions and vice-versa.

Simple example is of equities and gold. Gold does well when equities are struggling and doesn't do great when equities are performing well. So, it can be said that they are negatively correlated as they tend to move in opposite direction.

Diversification involves keeping multiple securities in a portfolio, of different traits and chatacteristics, such that they counter each other's risks in such a way that the total risk of the portfolio can be minimised.

When correlation of two securities in a portfolio is low, it means that they would perform differently under a given set of circumstances and thus they diversify the risk of the portfolio. Therefore, the statement in the question is incorrect and the right option is false.

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