Two assets with perfect negative correlation will have a portfolio variance of zero.
I am confused on why this statement is false. Shouldn’t the returns offset eachother (which would make the return variance 0 in the portfolio)?
Two assets with perfect negative correlation will have a portfolio variance of zero.
I am confused on why this statement is false. Shouldn’t the returns offset eachother (which would make the return variance 0 in the portfolio)?
Only if they’re held in the proper proportions.