Explanation:
A correlation coefficient of 0 implies that there is no linear relationship between the variables (i.e., their movements are completely uncorrelated). It does not mean that the variables move disproportionately in different directions. Therefore, option C is an incorrect interpretation of the correlation coefficient.
Ultimate access to all questions.
Q.69 Which of the following is most likely an INCORRECT interpretation of the correlation coefficient?
A
A correlation coefficient of +1 means that the mean returns of two assets move proportionately in the same direction.
B
A correlation coefficient of -1 means that the mean returns of two assets move proportionately in different directions.
C
A correlation coefficient of 0 means that the mean returns of two assets move disproportionately in different directions.
D
Any correlation greater than zero indicates a positive relationship.
No comments yet.