CFA L1 Correlation Question:

Can someone help me understand why this question Answer is C) instead of A)?

Thank you

If I know the value of X, I can predict the value of Y 100% of the time. :bulb:

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correlation measures how good/strong/certain the relationship is.

I might be 100% sure that in X increases by 10 y increases by 0.00000001 correlation = 1

I might be 100% sure that in X increases by 10 y idecreases by 0.00000001 correlation = -1

If the relationship is not so certain is going to bbe lower than +/- 1.

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Then correlation is just how strong is the relation between 2 variables is; but it doesn’t measure the impact of How much it changes variable Y consequence of changes in variable X?

I thought if variable Y change 10 and for consequence variable X change 1 means a correlation of 0.1 … but really is a +1 correlation

That is correct.

When you run the linear regression the gradient of the line will be 0.1

FTFY

FTFY