Interpret the Value of Correlation Coefficients and Squared Correlations $$\begin{array} { l r r } & \text { Stock Price } & \text { EPS } \\\text { EPS } & 0.875 & \\\text { PE } & 0.323 & - 0.111\end{array}$$

question 21

Multiple Choice

Interpret the value of correlation coefficients and squared correlations.
-Shown below is a correlation table showing correlation coefficients between stock
Price, earnings per share (EPS) and price / earnings (P / E) ratio for a sample of 19
Publicly traded companies. Which of the following statements is false?
Correlations: Stock Price, EPS, PE $$\begin{array} { l r r } & \text { Stock Price } & \text { EPS } \\\text { EPS } & 0.875 & \\\text { PE } & 0.323 & - 0.111\end{array}$$

• A) EPS is the best predictor of stock price.
• B) The strongest correlation is between EPS and stock price.
• C) There is a weak negative association between PE and EPS.
• D) PE is the best predictor of stock price.
• E) The weakest correlation is between PE and EPS.

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