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How would two stocks having positive covariance affect the selling of the product?

How would two stocks having positive covariance affect the selling of the product?<br/>

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Asked by Daulatguru, Last updated: Nov 09, 2024

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daulatguru

daulatguru

daulatguru
Daulatguru

Answered Aug 08, 2018

The rates of return tend to move in the same direction relative to their individual means

If one stock doubles in price, the other will also double in price is true if the correlation coefficient = 1. The two stocks will create a perfectly diversified portfolio if the correlation coefficient = -1. The two stocks need not be in the same industry.
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