Correlation between two individual stocks

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Answer whether each of the following statements is correct and explain your argument.

(a) Under an index model, the correlation between two individual stocks is one.

(b) Well-diversi?ed portfolios with a negative 0: are under-priced.

(c) An arbitrage portfolio arises when two or more security prices enable investors to construct a portfolio that will yield a positive return under all possible scenarios.

(d) A well-diversi?ed portfolio eliminates all risks.

Reference no: EM133205074

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