Q1) Assume that correlation coefficient between 2 variables is nearly zero. What does this say about relationship between them?

i) Variables are not related to each other

ii) Variables may be related but not in linear way

Q2) Assume that correlation coefficient between two variables X and Y is estimated to be 0.82. And no other information about variables is provided which of the given statements is most suitable about relationship between them?

i) Since the correlation is strongly positive increasing the value of X would cause an increase in the value ofY

ii) Since the correlation is strongly positive  increasing the value of Y would cause an increase in the value of X.

iii) Neither of the above: there may not be a direct causation between X and Y.

Q3) Commodity trader determines positive correlation between wheat prices and soybean prices, both measured as dollars per pound

Would you expect correlation to be higher, lower, or the same if prices for wheat were in dollars per pound and prices for soybeans were in dollars per kilogram? (1 kilogram is approximately 22 pounds).

a) Correlation will be higher C

b) Correlation will be lower P   

c) Correlation will be the same