n NISM Certifications
X NISM Series X
Medium

If the correlation between two stocks decreases over time, the portfolio’s risk would:

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Increase

  2. Decrease

    Correct answer

  3. C

    Remain constant

  4. D

    Fluctuate

Why this is the answer

Lower correlation reduces overall portfolio risk.

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