S99FINAL.16
16.Circle any/all that are true. (3)
Yahoo! and Amazon.com are positively correlated. Holding them together in a portfolio versus holding either one of them separately:

1. reduces your total risk
2. definitely reduces your systematic risk
3. could reduce your systematic risk
4. definitely reduces your unsystematic risk
5. could reduce your unsystematic risk
6. does not reduce your risk (they're positively correlated!)

c and d are true. Depending on which one you would have held separately, you may or may not reduce your systematic risk. You will definitely reduce your unsystematic risk relative to holding only one of them. "a" is too strong since you might not reduce your total risk relative to the least risk of the two depending on your portfolio weights. f is not true since as long as they aren't perfectly positively correlated, you get some diversification.

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