The Pearson Correlation Coefficient Measures the Degree to Which There

question 32

True/False

The Pearson correlation coefficient measures the degree to which there is a linear association between two intervally scaled variables.

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Definitions:

Firm-specific Risk

The type of risk that affects a particular company or industry, also known as unsystematic risk.

Diversified Away

The risk that can be reduced or eliminated in a portfolio through investments in a variety of assets, thus not tied to the performance of a single investment.

Market Risk

The risk of losses in positions arising from movements in market prices.

Firm-specific Risk

The portion of an asset's risk that is attributable to the company's individual factors, uncorrelated with general market movements.