Which of the following statements is correct?
A)For a few firms in completely different industries, it is possible to have a correlation that approaches -2.0.
B)A correlation of -1.0 means that the two firms are uncorrelated or that they have no relationship.
C)Most common stocks have low correlation with each other since they operate in different industries.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

Correlations range from -1.0 to 1.0, so a correlation of -2.0 is impossible. A correlation of -1.0 indicates a perfect negative relationship, not no relationship. Common stocks often have some level of correlation due to market factors, even if they are in different industries.

Which of the Following Statements Is Correct