easy · CFA Level I pm
An analyst at Westfork Bancorp is asked to explain the diversification benefit in a two-asset portfolio.
Which of the following conditions is required for the portfolio standard deviation to be less than the weighted average of the individual standard deviations?
- The assets must have equal weights in the portfolio.
- The correlation between the assets must be strictly less than +1.0.
- The correlation between the assets must be negative.
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