How does correlation with a market index impact diversification?

Lower correlation among assets improves diversification, reducing overall portfolio risk and increasing stability during market fluctuations.

Can correlation change over time?

Yes, correlation is dynamic and can shift based on economic conditions, market sentiment, and changes in asset behavior.

Is a high correlation with the market always good?

Not necessarily. High correlation means an asset follows market trends, which can be beneficial or risky depending on investment goals. Diversification benefits often come from low or negative correlation assets.

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What is CORRELATION WITH MARKET INDEX?

COST OF CAPITAL

Cost of capital is the return rate that a company must earn on an investment to maintain its market value.

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What is CORRELATION WITH MARKET INDEX?

COST OF CAPITAL

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