ECONOMICS
RISK AND RETURN
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
2
|
|
|
1
|
|
|
0
|
|
|
-1
|
Detailed explanation-1: -If two stocks have a correlation coefficient of 0, it means there is no correlation and, therefore, no relationship between the stocks.
Detailed explanation-2: -If the correlation is zero, the two assets have no predictive relationship.
Detailed explanation-3: -A correlation coefficient of zero indicates that no linear relationship exists between two continuous variables, and a correlation coefficient of −1 or +1 indicates a perfect linear relationship.
Detailed explanation-4: -The formula for correlation is equal to Covariance of return of asset 1 and Covariance of asset 2 / Standard. Deviation of asset 1 and a Standard Deviation of asset 2.
Detailed explanation-5: -Correlation and the Financial Markets If the correlation coefficient of two variables is zero, there is no linear relationship between the variables.