In this work, signal space diversity (SSD) is incorporated into a multiple-input multiple-output system with maximal ratio combining and transmit antenna selection. The performance of the proposed system with phase-shift keying (PSK) modulation is studied under a slow flat Rayleigh fading channel scenario with the correlated receive antennas. By adopting the realistic exponential correlation model, an exact closed-form expression is derived for pairwise error probability. The optimal rotation angles are obtained for binary and quadrature PSK signal constellations. The theoretical analysis is verified by the numerical simulations. It is shown that the error performance of the system can be improved with almost no extra complexity or cost. It is also demonstrated that the proposed scheme with SSD is more resistant against the studied correlation model as compared to the original scheme without SSD.