The range of possible correlations between two securities is

The range of possible correlations between two securities is defined as:

0 to +1.

0 to–1.

? 0.

? 1.

+1 to –1.

Solution

A) Correlation measures the extent of interdependence between two variables (It is a statistical measurement of relation between two variables).

Zero correlation indicates that there is no relationship between the two variables

A correlation of \"+1\" means a perfect positive correlation, which indicates that both variables moves in the same direction (one goes up, other variable also goes up)

A correlation of \"-1\" is a perfect negative correlation, means that both variables move in the opposite direction(ie one moves up, other variable goes down)

Over all range of possible correlation between two securities is +1 to -1