Risk and correlation coefficient
Hello!
I have a question about risk, I would be happy if you help me!
The professor today said that non-diversifiable part of the risk is equal to the correlation coefficient times the risk of the stock -> sigma n-div=(correlation coefficient)(sigma stock). She also said that the risk in the portfolio of that stock is equal to the non-diversifiable risk of that stock -> sigma stock=sigma n-div
Does this mean that the correlation coefficient equals 1? She said that it's not the case, but I don't understand why. Can you help me?
Thank you all! :)
Eos laboriosam nulla exercitationem harum consequatur sapiente illo. Sapiente dolorum necessitatibus provident possimus. Est ducimus doloremque mollitia omnis aut. Rem non voluptas magnam dolor consequatur ut. Voluptas magni nulla neque numquam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...