Consider the stock returns of Sun Life, Research in Motion, and the Bank of Montreal. You would expect the greatest correlation between the stocks of:
A) Sun Life and Research in Motion.
B) Bank of Montreal and Sun Life.
C) Research in Motion and Sun Life.
D) All correlations would be about the same.
E) Insufficient information.

Question

Quizplus · Accepted Answer

The stock returns of Sun Life and Bank of Montreal are likely to have a high correlation as they are both in the financial industry and may be affected by similar macroeconomic factors such as interest rates, inflation, and GDP. Research in Motion, on the other hand, is in the technology industry and may not have as strong of a correlation with the other two stocks.

Consider the Stock Returns of Sun Life, Research in Motion