ed040e4hmoderastartQuiaBaenderir fineaordinala Done Assignment 3 Two distinct cl
ID: 3239575 • Letter: E
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ed040e4hmoderastartQuiaBaenderir fineaordinala Done Assignment 3 Two distinct clusters hat are widely separated A very weak association 16. (7.28) Joe's retirement plan invests in stocks through an index fund that follows the behavior of the stock market as a whole, as measured by the S&P; 500 stock inde. Joe wants to buy a mutual track the index closely. He reads that monthly returns from Fidelity Techeology Fund have correlation r 0.77 with the S&P; 500 index and that Rdelity Real Estate Eund has correlation r 0.37 Which of these funds has the doser relationship to returns from the stock market as a whole? How do vou know? o The Fidelity Technology Fund tracks the stock market in 77% of the cases while the Fidelty Real Estate Fund tracks the stock market in only 37 of the cases. The Fidelity Technology Fund tracks the stock market more dosely since its correlation is doser to 1 The Fidelity Tech fund follows the stock market more closely since technology oriented companies have a larger proportion in the stock market when compared to real estate. e it's better for Joe to invest in the Real Estate Funds in order to diversify his portfolio. Does the information given tell Joe anything about which fund has had higher returns? No, since we don't know if the stock market as a whole has positive or negative returns. Yes, Joe will get higher returns with the Fidelity Real Estate Fund. each type of fund nor the stock market index. O No, the correlations do not provide any information on the mean return for Yes, Joe will get higher returns with the Fidelity Technology Fund. 40 PM O Type here to searchExplanation / Answer
Funds for both correlation coeffcients are postive that is as the market increases return from both funds also increases. The corelation coeffcient is higher for technology fund in magnitude. That is it is expected to give higher return in comaprison to real estate fund.
Step 1:
Option 1 is correct.
Step 2:
Last option is correct.
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