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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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A financial risk analyst is tasked with examining the relationship between the returns of two financial assets to determine if there is any interdependence between them. To understand this relationship, the analyst considers the concept of correlation. Correlation measures the strength and direction of a linear relationship between two variables, in this case, the returns of the two assets. Based on this, which of the following statements accurately describes the correlation and its implication for the interdependence of the asset returns?

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