Negative Correlation

[farena]

If the returns of two firms are negatively correlated, is it true that one of them must have a negative beta?

[Hammer]

Don't think so. If they are negatively correlated, then one will experience increases in profits while the other experiences decreases in profits (or increases of losses). This does not necessary imply that one is riskier than the market and the other is less risky. Although the risk / return relationship is generally strong, this is not necssarily always the case.

Hope that makes sense, and I'm happy to be corrected if wrong.