alleryStart learning →A correlation coefficient is described as showing how two variables move:
AAbove the tax line
BInside a single firm
CRelative to each other
DAgainst the calendar
Answer & Solution
Correct answer: C. Relative to each other
1. Correlation compares two series.
2. Portfolio construction depends on how holdings move together.
3. A correlation coefficient describes how two variables move.
4. It describes how they move relative to each other.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 15 'Risk, Return, and Capital Market Theory'_
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