Investment reports often include correlations

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High correlation does not mean that the values are the same. Investment reports often include correlations. Following a table of correlations among mutual funds, a report adds, "Two funds can have perfect correlation but different levels of risk. For example, Fund A and Fund B may be perfectly correlated, yet Fund A moves 20% whenever Fund B moves 10%." Write a brief explanation, for someone who knows no statistics, of how this can happen. Include a sketch to illustrate your explanation.

Reference no: EM131744832

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