I14-04

Question

https://gmatclub.com/gmat-focus-tests/resources/import/img/i14-04.png 
 
The graph above shows the share prices of Company X and Company Y over the first six months of 2021, based on the last working day of each month.
 
Select from each drop-down menu the option that creates the most accurate statement, given the information provided.

Based on the graph above, the share prices of the companies are  GRAPH_1_PLACEHOLDER .

The range of the share price of Company X on the last working day for the six months shown in the graph is  GRAPH_2_PLACEHOLDER .

Bunuel · Answer

Official Solution:

Drop-down 1: 
 
Two data sets are positively correlated if they both tend to be higher in the same cases. They are negatively correlated if one tends to be higher in cases where the other is lower. For positively correlated data, their lines tend to slope up or down together; the more consistently this happens, the stronger the positive correlation. Conversely, when two data sets are negatively correlated, the line for one tends to slope up while the other slopes down, and vice versa. The more consistently these opposite slopes occur, the stronger the negative correlation.
 
Examining the graph, we observe that the lines for the shares of Company X and Y slope in opposite directions in 4 out of 5 cases. Thus, we can conclude that the share prices are negatively correlated.
 
 Drop-down 2: 
 
The range is the difference between the highest value and the lowest value. The highest price for Company X's share was in June at 28, and the lowest price was in April at 20, making the range equal to 28 - 20 = 8.

Correct answer:

Dropdown 1:  "negatively correlated"

Dropdown 2:  "8"

Bunuel · Answer

I have revised the question, solution, and formatting by adding more details to enhance clarity.

thisisakr · Answer

Shouldn’t even one occurrence of positive occurrence be enough to prove that there is no correlation at all.

If no then one can never say for sure if there is no correlation or not

Bunuel · Answer

One occurrence of positive correlation does not prove "no correlation." A consistent lack of a pattern across all observations indicates no correlation.

Manyasss · Answer

I like the solution - it’s helpful.

saynchalk · Answer

I did not quite understand the solution. The graphs seem to be moving in different directions for 3/7 entries, and the second entry as well moves in opposite directions. Isn't that enough to say that the correlation is negligible?

Bunuel · Answer

There are only  5 moves  (January to February, February to March, etc.), not 7. You’re mistakenly counting  data points instead of movements . Out of these 5 moves, 4 show the prices moving in opposite directions, which clearly indicates a  negative correlation . Correlation is determined by overall trends, not isolated points.

saynchalk · Answer

Ah I see now, thanks a lot!

thisisakr · Answer

I don’t quite agree with the solution. The graph is clearly positively correlated in feb ~ march section. You can’t simply ignore it and call it overall negatively correlated especially when the answer choice has a not correlated option. This makes no sense as if you can ignore it then a graph will never be not correlated. 
If no please tell me where am I going wrong

Bunuel · Answer

When asked about the share price correlation, we need to observe the overall general trend, not just one section. Examining the graph, we see that the lines for Company X and Company Y move in opposite directions in 4 out of 5 cases, indicating a negative correlation overall.

awaikar · Answer

I like the solution - it’s helpful.

Rishika1810 · Answer

I don’t quite agree with the solution. For part 1, 4 out of 5 cases does not imply negative correlation cause there is still 1 remaining case. How would we know whether we want a 100% accurate answer, or one that's 80%?

Bunuel · Answer

Correlation is not about being 100% perfect, it’s about the overall  trend . If in most cases (like 4 out of 5), when one line goes up the other goes down, that’s enough to call it  negative correlation . It doesn’t need to happen every single time, small deviations are fine as long as the overall pattern is clear.

By the way, this has already been explained in the solution and in the discussion above.

sanikaprakash · Answer

I like the solution - it’s helpful.

f3rn4nd44m0r1m · Answer

I like the solution - it’s helpful.

iliagigauri · Answer

I don’t quite agree with the solution. the correlation, even though existent, is only -0.51 and is statistically insignificant

Bunuel · Answer

Whether it is statistically significant or not, there is a negative correlation, and that is what the question asks. Also, since correlation values range from -1 to +1, a value around -0.5 actually indicates a moderately strong negative relationship.

iliagigauri · Answer

a weak negative correlation can easily be interpreted by a naked eyes as no correlation since it's on the edge. no correlation doesn't only mean 0 in the range from -1 to +1, it can be +/-0.3 which stands close to the example presented in the exercise.

Bunuel · Answer

The correlation in the question isn’t weak. It’s around -0.51, which indicates a moderate negative relationship. So I’m not sure what you’re trying to say there.

I14-04

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