A is correct. Whether the risk budgeting process focuses explicitly on it or not, it should result in choosing assets based on their ability to add the best return for each unit of the risk budget they use. Although some risk budgeting processes consider multiple risk sources, even a process based on a single risk can provide substantial benefits to an organization. While risk budgeting focuses on allocating the portfolio’s risk tolerance to its best uses, this does not necessary define a portfolio that will beat passive benchmarks. Risk might be best budgeted to passive investments. 

B is incorrect because a portfolio risk budgeting process using only a single simple risk measure can provide substantial benefits to the organization 

C is incorrect because risk budgeting need not result in active investment decisions; the superior sources of return per unit of risk might be passive investment vehicles.

A is correct. In general, adding assets classes with low correlation improves the risk–return trade-off as long as the stand-alone risk of the added asset class does not exceed its diversification effect. 

B is incorrect because adding assets classes with low correlation will only improve the risk–return trade-off if the stand-alone risk of the added asset class does not exceed its diversification effect.

C is incorrect because adding assets classes with low correlation will only improve the risk–return trade-off if the stand-alone risk of the added asset class does not exceed its diversification effect.