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**CFA Practice Question**

In developing a simulation model, you should be concerned if you find that two variables:

II. have zero correlation.

III. have a strong, negative correlation.

I. have a strong, positive correlation.

II. have zero correlation.

III. have a strong, negative correlation.

A. I only

B. I and III

C. I, II and III

**Explanation:**A strong correlation can be either a positive or a negative correlation.

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**User Contributed Comments**
1

User |
Comment |
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chriswwu |
I got the right answer but I am confused. In a two factor simulation, I will simulate X, Y by taking their correlation (one of the inputs into the model) into account. What is the problem? Why would I be concern? |