ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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ABC stocks moves slightly on the same direction as XYZ
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ABC stocks moves completely opposite of XYZ
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XYZ moves completely the same as ABC
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ABC moves perfectly along with XYZ
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Detailed explanation-1: –1.00 represents a perfect negative correlation, where one variable falls by exactly the amount that another one rises. Meanwhile a correlation of +1.00 indicates a perfect positive correlation, where each variable moves in exact tandem.
Detailed explanation-2: -A negative correlation is a relationship between two variables in which an increase in one variable is associated with a decrease in the other. An example of a negative correlation would be the height above sea level and temperature.
Detailed explanation-3: -One example of negative correlation would be oil prices and airline stocks. One would expect that sustained high fuel costs would generally depress the profits of airlines, and thus their stocks’ values.
Detailed explanation-4: -In statistics, a perfect negative correlation is represented by the value-1.0, while a 0 indicates no correlation, and +1.0 indicates a perfect positive correlation.