What is the most likely correlation coefficient between a stock-index mutual fund and the S&P 500?
A) -1
B) 0
C) 1
D) .5

Question

Quizplus · Accepted Answer

A stock-index mutual fund is designed to track the performance of a specific stock index, such as the S&P 500. Therefore, there should be a strong positive correlation between the two. A correlation coefficient of 1 would indicate a perfect positive correlation, while a coefficient of 0.5 would indicate a strong positive correlation. A correlation coefficient of -1 would indicate a perfect negative correlation, which is unlikely in this case. A coefficient of 0 would indicate no correlation at all, which is also unlikely. Therefore, the best choice is C.

What Is the Most Likely Correlation Coefficient Between a Stock-Index