Justified P/E

CFA Level III Portfolio Management
#1

From CFA Vol 3 book page 171, the answer for qn 12 is “a high correlation of the US equity market with international equity markets would increase the risk of the US equity market and thus increase the required return on that market…”

Could someone explain to me the correlation part?

Thank you!

#2

The high correlation means less diversification effects, which would increase standard derivation (total risk)