Alternative Investments Q8
- Option : C
- Explanation :
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A. Low Sharpe ratio – This would not be attractive. A low Sharpe ratio implies lower risk-adjusted returns, which is not a benefit.
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B. High correlation with traditional investments – This also is not desirable. Investors look for low correlation to diversify risk. High correlation means the investments tend to move together, reducing diversification.
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C. Diversifying potential – This is correct. Alternative investments often have low correlation with traditional assets like stocks and bonds, making them valuable for portfolio diversification and potentially reducing overall portfolio risk.
Correct Answer: C. diversifying potential
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