In a strategic asset location assets within a specific asset class are least likely to have:
- Low paired correlations
- Low correlation with other research classes
- Similar risk can return expectations
Answer says Option 1 but can someone help HOW?
Because In choosing user classes to consider when developing the strategic asset allocation correlation of return within an asset class should be relatively high Whereas low correlation of return between the classes.
Different assets have different return and risk characteristics. Some are similar and others are not. We classify them into different classes based on their characteristics to simplify your investment decisions process.
The assets within one class have high correlations. And there’re low correlations among different classes.
So why is the answer here saying option 1 shouldn’t it be option 2
The subject is the assets within a specific asset class. Option 2 is unrelated.