You have plotted the monthly returns for two securities for the past five years on the same graph.The pattern of the movements of each of the two securities generally rose and fell to the same degree in step with each other.This indicates the securities have:
A)no correlation with each other.
B)a weak negative correlation.
C)a strong negative correlation.
D)a strong positive correlation.
E)a weak positive correlation.

Question

Quizplus · Accepted Answer

The fact that the pattern of movements of the two securities rose and fell to the same degree indicates a strong positive correlation. When two securities have a strong positive correlation, their movements are highly synchronized, meaning they tend to rise and fall in tandem.

You Have Plotted the Monthly Returns for Two Securities for the Past