Asked by
Monique Alyssa
on Oct 26, 2024
Verified
The covariance between these two assets indicates that ________.
A) the overall risk increases
B) the overall risk reduces
C) the X index fund is riskier than the Y index fund
D) there is no risk involved
Covariance
A measure indicating the direction of the linear relationship between two variables, whether they tend to move together or in opposite directions.
Two Assets
Refers to any two types of financial instruments or resources owned by individuals or businesses, such as stocks, bonds, or real estate properties.
Overall Risk
The total exposure to loss or potential for unfavorable outcomes in an investment or decision, encompassing various types of risk factors.
- Examine the interplay between risk and return when making choices regarding investments.
- Acquire knowledge on the function of covariance in the analysis of risk associated with portfolios.
Verified Answer
JN
Learning Objectives
- Examine the interplay between risk and return when making choices regarding investments.
- Acquire knowledge on the function of covariance in the analysis of risk associated with portfolios.