If the correlation of the returns of two assets is 100%, then
A)if one asset's return increases by 10%, the second asset's return will decrease by exactly 10%.
B)if one asset's return increases by 10%, the second asset's return will also increase, but not necessarily by 10%.
C)if one asset's return increases by 10%, the second asset's return will usually, but not always, also increase.
D)if one asset's return increases by 10%, the second asset's return will also increase by exactly 10%.

Question

Quizplus · Accepted Answer

A correlation of 100% means that the two assets move together in the same direction. However, the magnitude of the movement can be different. Therefore, if one asset's return increases by 10%, the second asset's return will also increase, but not necessarily by 10%.

If the Correlation of the Returns of Two Assets Is