How will the returns on two assets react if those returns have a perfect positive correlation?
I. move in the same direction
II. move in opposite directions
III. move by the same amount
IV. move by either equal or unequal amounts
A)I and III only
B)I and IV only
C)II and III only
D)II and IV only
E)III only

Question

Quizplus · Accepted Answer

When two assets have a perfect positive correlation, their returns move in the same direction, which means when one asset's return increases, the other's return also increases, and vice versa. However, moving by the same amount is not guaranteed; they can move by either equal or unequal amounts, depending on the magnitude of their returns.

How Will the Returns on Two Assets React If Those