If the returns of two securities are compared over time and there appears to be no relationship between their movements,what is the likely value of their coefficient of correlation?
A)+1
B)−1
C)0
D)+∞ (infinity)

Question

Quizplus · Accepted Answer

If there appears to be no relationship between the movements of two securities, their coefficient of correlation is likely to be zero. This means that there is no linear relationship between the two variables, and they move independently of each other. A coefficient of +1 indicates a perfect positive relationship, a coefficient of -1 indicates a perfect negative relationship, and a coefficient of +∞ is not possible as it implies an infinite positive relationship, which is not realistic.

If the Returns of Two Securities Are Compared Over Time