Question

Which one of these conditions must exist if the standard deviation of a portfolio is to be less than the weighted average of the standard deviations of the individual securities held within that portfolio?

a. β< 1

b. Rm> 1

c. ρ< 1

d. β = 0

e. ρ >1

Answer 1

c. ρ< 1

the above is the answer

because this means lower correlation among the securities which would reduce the portfolio standard deviation die to benefit of diversifaction.