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The potential benefits of multiple-antenna systems may be limited by two types of channel degradations-rank deficiency and spatial fading correlation of the channel. In this paper, we assess the effects of these degradations on the diversity performance of multiple-input multiple-output (MIMO) systems, with an emphasis on orthogonal space-time block codes (OSTBC), in terms of the symbol error probability (SEP), the effective fading figure (EFF), and the capacity at low signal-to-noise ratio (SNR). In particular, we consider a general family of MIMO channels known as double-scattering channels-i.e., Rayleigh product MIMO channels-which encompasses a variety of propagation environments from independent and identically distributed (i.i.d.) Rayleigh to degenerate keyhole or pinhole cases by embracing both rank-deficient and spatial correlation effects. It is shown that a MIMO system with transmit and receive antennas achieves the diversity of order in a double-scattering channel with effective scatterers. We also quantify the combined effect of the spatial correlation and the lack of scattering richness on the EFF and the low-SNR capacity in terms of the correlation figures of transmit, receive, and scatterer correlation matrices. We further show the monotonicity properties of these performance measures with respect to the strength of spatial correlation, characterized by the eigenvalue majorization relations of the correlation matrices.