A Correlation Coefficient of -1

question 51

Multiple Choice

A correlation coefficient of -1.0 between two sets of numbers indicates _____.

• A) a complete lack of any correlation between the two sets
• B) that when one set of numbers goes up, so does the other set
• C) that when one set of numbers goes up, the other set goes down
• D) a partial correlation between the two sets
• E) an indefinite relationship between the two sets

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Definitions:

Minimum Return

The lowest acceptable return on an investment, set by an investor or implied by a financial model or market expectation.

Residual Income

The amount of net income an entity generates beyond its required rate of return on its investments.

Invested Assets

Assets that a company or individual allocates resources toward with the expectation of generating a future benefit or income.

Maximum Return

The highest possible profit or gains that can be achieved from an investment or business venture.