Intersector default correlations are typically lower than intrasector default correlations, so the lending companies are recommended to create a sector-diversified loan portfolio to decrease default correlation risk. This strategy is based on the principle of diversification, which suggests that spreading investments across a variety of sectors can reduce the risk associated with any single sector. By diversifying their loan portfolios across multiple sectors, lending companies can mitigate the risk of default correlation. This is because the default risk of one sector is less likely to be correlated with the default risk of another sector. Therefore, even if one sector experiences a high default rate, the impact on the overall portfolio would be limited due to the low correlation with other sectors. This strategy effectively reduces the overall risk and potential losses for the lending companies.

Choice A is incorrect. While it is true that diversification can help mitigate risk, the statement that intersector default correlations are typically higher than intrasector default correlations is incorrect. In fact, the opposite is true: intrasector default correlations are typically higher than intersector default correlations. This means that diversifying across sectors can actually help reduce risk.