If the Correlation Between Two Stocks Is -1, the Returns

question 35

Multiple Choice

If the correlation between two stocks is -1, the returns:

• A) generally move in the same direction.
• B) move perfectly opposite one another.
• C) are unrelated to one another as it is <0.
• D) have standard deviations of equal size but opposite signs.

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Definitions:

Operating Cash Flows

The cash generated by a company’s normal business operations.

Payment Obligation

A financial commitment that requires a party to pay a certain amount of money by a specified date.

Character

In finance, character often refers to the qualitative assessment of a borrower's integrity and history in meeting debt obligations, used in credit analysis.

Capacity

The maximum amount that something can contain or produce, often used in the context of production and manufacturing facilities.