Answer (D) is correct . The correlation coefficient ( r) measures the degree to which any two variables are related. It ranges from –1.0 to 1.0. Perfect positive correlation (1.0) means that the two variables always move together. Perfect negative correlation (–1.0) means that the two variables always move inversely to one another. A neutral correlation, or no correlation, is 0.0. Skewed is a nonsense concept in this context.
Answer (A) is incorrect because Returns on two stocks can be correlated in any value that falls within the range of –1.0 to 1.0.
Answer (B) is incorrect because Returns on two stocks can be correlated in any value that falls within the range of –1.0 to 1.0.
Answer (C) is incorrect because Returns on two stocks can be correlated in any value that falls within the range of –1.0 to 1.0.
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