invic

Determine and interpret the correlation coefficient for the two variables X and Y. The standard deviation of X is 0.05, the standard deviation of Y is 0.08, and their covariance is −0.003.

A) −0.75 and the two variables are negatively associated.

B) +0.75 and the two variables are positively associated.

C) −1.33 and the two variables are negatively associated.

---

The correlation coefficient is the covariance divided by the product of the two standard deviations, i.e. −0.003 / (0.08 × 0.05).

invic

If the correlation between two variables is −1.0, the scatter plot would appear along a:

A) straight line running from southwest to northeast.

B) a curved line running from southwest to northeast.

C) straight line running from northwest to southeast.

---

If the correlation is −1.0, then higher values of the y-variable will be associated with lower values of the x-variable. The points would lie on a straight line running from northwest to southeast.

invic

Which of the following statements regarding scatter plots is most accurate? Scatter plots:

A) illustrate the relationship between two variables.

B) illustrate the scatterings of a single variable.

C) are used to examine the third moment of a distribution (skewness).

---

A scatter plot is a collection of points on a graph where each point represents the values of two variables. They are used to examine the relationship between two variables.

invic

Thomas Manx is attempting to determine the correlation between the number of times a stock quote is requested on his firm’s website and the number of trades his firm actually processes. He has examined samples from several days trading and quotes and has determined that the covariance between these two variables is 88.6, the standard deviation of the number of quotes is 18, and the standard deviation of the number of trades processed is 14. Based on Manx’s sample, what is the correlation between the number of quotes requested and the number of trades processed?

A) 0.78.

B) 0.18.

C) 0.35.





--------------------------------------------------------------------------------


Correlation = Cov (X,Y) / (Std. Dev. X)(Std. Dev. Y)
Correlation = 88.6 / (18)(14) = 0.35