Understanding Multicollinearity in Multiple Regression

During a recent analysis, a financial analyst is examining a dataset to predict stock returns based on three independent variables: market capitalization, the price-to-earnings ratio, and the debt-to-equity ratio. Upon conducting a multiple regression analysis, the analyst notices high variance inflation factors (VIFs) for both the price-to-earnings ratio and the debt-to-equity ratio.

The analyst is concerned about multicollinearity in the model but is not entirely sure about its implications and how to address it. Which of the following statements about multicollinearity is true?