CFA Practice Question

CFA Practice Question

What does a perfect positive correlation between the variables Ri and Rj indicate?
A. A movement in one random variable results in a proportional positive movement in the other relative to its mean.
B. A movement in one random variable results in an exact opposite proportional movement in the other relative to its mean.
C. Prediction of Ri cannot be made on the basis of Rj using linear methods.
Explanation: A perfect positive correlation between the variables Ri and Rj indicates a movement in one random variable results in a proportional positive movement in the other relative to its mean.

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