Which of the Following Statements About Correlation Is Incorrect

question 56

Multiple Choice

Which of the following statements about correlation is incorrect?

• A) If two variables are statistically independent of each other, their correlation coefficient is zero.
• B) Negatively correlated investments offer the best opportunities for diversification.
• C) If two investments are perfectly correlated, their correlation coefficient is +1.
• D) The risk of fire is positively correlated with the risk of traffic accidents.

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Definitions:

Short-term Performance

An evaluation of an entity's achievements or results over a brief period, typically focusing on metrics like quarterly earnings or monthly sales figures.

Long-term Performance

The extended period over which an entity or investment achieves its goals or demonstrates effectiveness, usually measured over years.

Firm

A business organization or enterprise, particularly one involving in professional or commercial activities.

Market Development Strategy

A business strategy that involves expanding the potential market through new users or new uses for a product.