Which of the following statements about the covariance is correct?
A) The covariance measures risk.
B) The covariance is a number between -1 and +1.
C) The covariance measures how two variables move relative to each other.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

A) The covariance does not measure risk, it measures the degree of linear association between two variables.
B) The covariance can take on any value, positive or negative, without a limit.
C) The covariance measures how two variables move relative to each other, indicating whether they move together (positive covariance) or move in opposite directions (negative covariance). Therefore, only option C is correct.

Which of the Following Statements About the Covariance Is Correct