What does it mean if this value were zero, Financial Management

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What does it mean when we say that the correlation coefficient for two variables is -1? What does it mean if this value were zero? What does it mean if it were +1?

Correlation is measured by the correlation coefficient that is symbolized by the letter r. The correlation coefficient be able to take on values between +1.0 (perfect positive correlation) to -1.0 (perfect negative correlation).  The closer r is to +1.0 the more the two variables will tend to move by each other at the same time.  The closer r is to -1.0 the more the two variables will be liable to move opposite each other at the same time.  An r value of zero specifies that the variables' values are not related at all.  This is recognized as statistical independence.

 

 


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