CFA Practice Question

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CFA Practice Question

Which of the following statements is not true?

A. -1 < σ(X,Y) < 1
B. An inverse relationship between X and Y implies negative correlation.
C. The correlation between two random variables is given by the ratio of their covariance with the product of their standard deviations.
Correct Answer: A

-1 < σ(X,Y) < 1 is incorrect. The correct statement is: -1 <= σ(X, Y) <= 1. The other statements are true.

User Contributed Comments 4

User Comment
annieyiyan I thought the correct answer: 0<=p(x,y)=1, why the joint probility could go negotively (-1<=p(x,y)
mike250 it's not joint prop. It is the correlation between X and Y.
alester83 annie, that statement is correct for covariance
Rachelle3 A very complicated way of saying at some point it must be from -1 up to 1 compare correct answer to the option of the wrong answer A which does not show < = signs.
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