Which of the following statements is true?
A) A correlation of -2 is a perfect negative correlation.
B) The correlation coefficient may be greater than +1.
C) A correlation equal to +1 is a perfect positive correlation.
D) A zero correlation indicates a strong relation between the returns on the two assets.

Question

Quizplus · Accepted Answer

A correlation coefficient of +1 indicates a perfect positive correlation, meaning that as one variable increases, the other variable increases in a perfectly linear manner. Options A and B are incorrect because the correlation coefficient ranges from -1 to +1, and option D is incorrect because a zero correlation indicates no linear relationship between the variables.

Which of the Following Statements Is True