If you are considering investing in German stocks as a means to reduce the risk

Question

If you are considering investing in German stocks as a means to reduce the risk of your portfolio, the initial factor that you should examine is: a. The average rate of return of the portfolio when you combine U.S. and German stocks. b. The standard deviation of the German stocks. c. The standard deviation of the German stocks compared to the standard deviation of U.S. stocks. d. The correlation between the rates of return for German stocks and U.S. stocks. e. The coefficient of variation (CV) of rates of return for German stocks versus the CV of rates of return for U.S. stocks.

Explanation / Answer

d. The correlation between the rates of return for German stocks and U.S. stocks.

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