Consider the following correlations:
Given this data,which of the following is most preferable if an investor can only select one pair of companies?

A)Apple and IBM
B)Disney and IBM
C)Disney and Apple
D)It does not matter which two are selected-there is no preference order.

Question

Consider the following correlations:
Given this data,which of the following is most preferable if an investor can only select one pair of companies?

A)Apple and IBM 
B)Disney and IBM 
C)Disney and Apple 
D)It does not matter which two are selected-there is no preference order.

Quizplus · Accepted Answer

Disney and Apple show a stronger positive correlation of 0.89 compared to Apple and IBM with a correlation of 0.70 and Disney and IBM with a correlation of 0.56. This suggests that changes in the stock prices of Disney and Apple are more likely to move in the same direction, providing a potentially more stable investment option.

Consider the Following Correlations