If the goal is to have low correlation between two stocks, what linear correlation coefficient be picked and why? if the goal is to have one stock go up when the other goes down, what linear correlation coefficient be picked and why?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter10: Introduction To Simulation Modeling
Section: Chapter Questions
Problem 46P
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If the goal is to have low correlation between two stocks, what linear correlation coefficient be picked and why?

if the goal is to have one stock go up when the other goes down, what linear correlation coefficient be picked and why?

 

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Step 1 About the question:

This question is related to the topic-forecasting approach and this topic falls under the operations management syllabus.

According to the question, for two different scenarios, I would pick the linear correlation coefficient and I would state the logic behind the same. Answers are given in the next step.

 

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