Which of the following statements about the correlation coefficient is FALSE?
A) The values range between -1 to +1.
B) A value of +1 implies that the returns for the two stocks move together in a completely linear manner.
C) A value of -1 implies that the returns move in a completely opposite direction.
D) A value of zero means that the returns are independent.
E) A value of zero means that the returns had no linear relationship.

Question

Quizplus · Accepted Answer

A value of zero in correlation coefficient indicates that there is no linear relationship between the two variables, not that they are independent. Independence is a stronger condition than zero correlation; two variables can be uncorrelated but not independent.

Which of the Following Statements About the Correlation Coefficient Is