A Statement Is Made About Correlation

question 132

Multiple Choice

A statement is made about correlation. State whether the correlation is positive or negative and whether the correlation ismost likely due to coincidence, a common underlying cause, or a direct cause.
-Over the last 10 years in this town, as the amount of open space has decreased, consumer spending has increased.

• A)Positive correlation; common underlying cause
• B)Negative correlation; common underlying cause
• C)Negative correlation; direct cause
• D)Positive correlation; direct cause

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Definitions:

Covariance

A measure that indicates the extent to which two securities move in the same or opposite directions.

Stock Selection Return

The return achieved by an investor that can be attributed to the specific stocks chosen for investment, rather than the overall market movement.

Cross Border Fund

An investment fund that seeks to invest in assets located in countries other than where the fund is domiciled.

Benchmark

A standard or point of reference against which things may be compared or assessed, often used in investing to measure the performance of securities or portfolios.