1 the correlation figure between series m n and p

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Unformatted text preview: series having a correlation coefficient of ­1 Uncorrelated describes two series that lack any relationship and have a correlation coefficient of nearly zero Figure 5.1 The Correlation Figure Between Series M, N, and P Between Correlation: Why Diversification Works! Why To reduce overall risk in a portfolio, it is best to combine assets that have a negative (or low­ positive) correlation Uncorrelated assets reduce risk somewhat, but not as effectively as combining negatively correlated assets Investing in different investments with high positive correlation will not provide sufficient diversification Figure 5.2 Combining Negatively Figure Correlated Assets to Diversify Risk Correlated Table 5.3 Correlation, Return, and Risk for Table Various Two-Asset Portfolio Combinations Various Figure 5.3 Range of Portfolio Return and Figure Risk for Combinations of Assets A and B for Various Correlation Coefficients for Figure 5.4 Risk and Return for All Figure Combinations of Assets A and B for Combinations Various Correlation C...
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This note was uploaded on 10/31/2012 for the course ECON 435 taught by Professor Staff during the Fall '08 term at Maryland.

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