Practice Applications In Engineering (16.7) - Covariance and Correlation

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6 sample questions

Question 1.
What is covariance?
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Think about how changes in one variable relate to changes in another.
Question 2.
What value range does correlation fall in?
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Consider the telling extremes of a relationship.
3Question 3.
What does a positive covariance indicate?
- Inverse relationship
- Positive relationship
- No relationship
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Think about how two variables can move together.
4Question 4.
Correlation values range from:
- True
- False
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Recall the extremes of correlation.
Question 5.
Given two datasets from two different production lines, X = {10, 20, 30} and Y = {5, 15, 25}, calculate the covariance and interpret its meaning.
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Consider the means of both data sets.
Question 6.
In a financial portfolio, if Asset A has a return of {2, 3, 4} and Asset B has a return of {1, 5, 10}, evaluate and interpret the correlation.
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Your calculations should reflect their connectedness in terms of risk and return.

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