--%>

The correlation coefficient for two variable

What happens if the correlation coefficient for two variables is -1 or 0 or +1?

E

Expert

Verified

Correlation is calculated using the correlation coefficient and represented by the letter r. Correlation coefficient can have values between perfect negative correlation (-1.0) to perfect positive correlation (+1.0).
a) The closer r is to +1.0, the more will be chances that the two variables will try to move with each other at the same time.
b) The closer r is to -1.0, the more will be the chances that two variables will try to move opposite each other at the same time.
c) An r having zero value shows that the variable’s values are not related to each other at all.  It is called as statistical independence.

   Related Questions in Financial Management

  • Q : Answer Rs. Sales 2,40,000 Variable

    Rs. Sales 2,40,000 Variable costs 1,44,000 Fixed costs 26,000 Profit before tax 70,000 Rate of tax 40% Firm is proposing to buy the new plant that could generate extra annual profit of Rs. 10,000. The fixed cost of new plant is expected to Rs. 4000. New plant would increase sales volume by Rs. 40,00

  • Q : Managerial |Accounting help Janice

    Janice Colangelo heads the Training Centre of the large HR Consulting firm EMT Consulting. The firm has three major departments: Recruitment, Training and Career Services. The Training Centre provides management training for employees of various businesses. Recruitment provides recruitment service

  • Q : Positive interest rates on bonds in a

    Would there be positive interest rates on bonds in a world with absolutely no risk (no default risk, maturity risk, and so on)? Why would a lender demand and a borrower be willing to pay, a positive interest rate in such a no risk world?

  • Q : Determine level of sales to achieve-

    Hebner Housing Corporation consist of forecast the given numbers for the upcoming year as follows: • Net income = 180,000. • Sales = $1,000,000. &b

  • Q : Matching loan and deposit maturities

    Good fellow national bank decided to compete with a savings and loan by offering 30 year fixed rate mortgage loans at 8% annual interest. It plans to obtain the money got the loans by selling one year 6% CD to it's depositors. During first year of operation, good fellows sold it's depositors 1,000,0

  • Q : Time Businesses spend their time,

    Businesses spend their time, effort and money in producing forecasts. Explain

  • Q : How are you able to measure real

    How are you able to measure real probabilities?

  • Q : Example of traditional Value at Risk

    Illustrates an example of traditional Value at Risk by Artzner et al?

  • Q : Remark on bretton Woods system One can

    One can state that the Bretton Woods system was programmed to an eventual demise. Remark on this proposition.The answer to this question is associated to the Triffin paradox. Under gold-exchange system, the reserve-currency country must run BOP

  • Q : How many assumptions are made to find

    How many assumptions are made to find a taxi?