Explanation:
The PCs are uncorrelated with each other while individual interest rates are highly correlated. Principal Component Analysis (PCA) is a statistical procedure that uses an orthogonal transformation to convert a set of observations of possibly correlated variables into a set of values of linearly uncorrelated variables called principal components. This transformation is defined in such a way that the first principal component has the largest possible variance, and...
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Q.1610 Principal Component (PC) Analysis is unique in scope and helps investors to achieve maximum gain from trading of securities. Which of the following is correct with regard to PCs?
A
The PCs are uncorrelated with each other while individual interest rates are highly correlated.
B
The PCs are correlated with each other while individual interest rates are highly uncorrelated.
C
The PCs are poorly correlated with each other while individual interest rates are highly correlated.
D
The PCs are poorly uncorrelated with each other while individual interest rates are highly uncorrelated.
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