Financial Risk Manager Part 2

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A risk analyst at a bank is asked to prepare a report that tracks the relationship between volatility and asset performance. The analyst assesses the performance of various asset classes using empirical evidence over the last three decades and compares returns on those asset classes with changes in market volatility. Which of the following would be a correct statement for the analyst to include in the report?

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Currency strategies such as currency carry trades tend to perform poorly during periods of high volatility.

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When volatility is rising, all assets are either positively or negatively affected, with the exception of risk-free bonds.

Whether the relationship between stock returns and volatility is positive or negative depends on the phase of the business cycle.

When volatility is rising, stock returns tend to increase but bond returns tend to decrease.