You have plotted the data for two securities over time on the same graph, ie., the month return of each security for the last 5 years. If the pattern of the movements of the two securities rose and fell as the other did, these two securities would have:
A) no correlation at all.
B) a weak negative correlation.
C) a strong negative correlation.
D) a strong positive correlation.

Question

Quizplus · Accepted Answer

When two securities move in the same direction at the same time (one rises as the other rises, and one falls as the other falls), they are said to have a strong positive correlation. This means their movements are closely linked in a positive manner, indicating that when one security's value increases, the other's does too, and vice versa.

You Have Plotted the Data for Two Securities Over Time