The Major Difference Between the Correlation Coefficient and the Covariance

question 28

Multiple Choice

The major difference between the correlation coefficient and the covariance is that:

• A)the correlation coefficient can be positive,negative or zero while the covariance is always positive
• B)the correlation coefficient measures relationship between securities and the covariance measures relationships between a security and the market
• C)the correlation coefficient is a relative measure showing association between security returns and the covariance is an absolute measure showing association between security returns
• D)the correlation coefficient is a geometric measure and the covariance is a statistical measure