Questions / Quant research, Take-home data cases

Correlating prices

Challenge, about 6 minutes. Question R383.

Two price series are below. What is the correlation of their prices?

day,A,B
1,100,50
2,101,50.5
3,102,50.3
4,103,51.1
5,104,51

Answer it in the app It's free. You get hints, a second try if you miss, and a follow-up question.

Show the answer and worked solution

Answer: 0.8825 correlation

  1. Both trend up.
  2. ρ(prices) = 0.882.

Interview shortcut. Pearson on levels; both drift upward.

Takeaway. Trending levels correlate whatever the returns do.

In the app this has a follow-up where one thing about the setup changes. Try the follow-up.

More take-home data cases questions