A Tale of Two Comonotonic Assets : Can They Provide Diversification Benefits?

The lack of hedging between comonotonic assets is undisputed. Indeed, some authors define the absence of hedging through the property of comonotonicity. In this paper, we study instances where benefits from diversification exist even if the assets in the portfolio do not hedge each other, i.e., even if they are comonotonic. We indicate that the existence of these benefits depends heavily on the application at hand and how one characterizes diversification benefits