Re: CAPM_diversification(positively correlated stock)

Posted by Dreyfus on Jun 19, 2014; 5:50pm
URL: http://discussion-forum.276.s1.nabble.com/CAPM-diversification-positively-correlated-stock-tp7593095p7593115.html

Hey kangkan, Vandita and Subhayu, I don't think(personally) that correlation is a good measure when considering financial time series especially. As what elementary finance says that if u hv a portfolio of two stocks then always choose those who hv negative correlation so that risk is almost neutralize but is this always a good criterion? I mean if I hv two stocks say one of Indian company and another one of UK firm and furthermore this Indian does not related by any means to UK firm but the correlation between the returns of these stocks is -1. Will u still consider is portfolio?? My answer will be no in any case :p