The correct answer is A. A portfolio with securities all having positive correlation with each other.
A portfolio with securities all having positive correlation with each other has the least reduction of risk because the securities will all move in the same direction, which means that if one security goes down in value, the others are likely to go down in value as well. This can lead to large losses for the portfolio.
A portfolio with securities all having zero correlation with each other has the most reduction of risk because the securities will move in different directions, which means that if one security goes down in value, the others are not likely to go down in value. This can help to reduce the overall risk of the portfolio.
A portfolio with securities all having negative correlation with each other has a moderate reduction of risk because the securities will move in opposite directions, which means that if one security goes down in value, the others are likely to go up in value. This can help to reduce the overall risk of the portfolio, but it is not as effective as a portfolio with securities all having zero correlation with each other.
A portfolio with securities all having skewed correlation with each other has an unpredictable reduction of risk because the securities will move in a variety of directions, which means that it is difficult to predict how the portfolio will perform. This can lead to both large gains and large losses for the portfolio.