CTA Statistical & Quantitative Methods 1

Question 1

What does a Pearson correlation coefficient of -1.0 between two assets indicate?

Accepted Answer

A perfect negative linear relationship between the assets

Answer

A correlation coefficient of -1.0 indicates a perfect negative linear relationship, meaning the two assets move in exactly opposite directions.

Question 2

Which statistical measure is used to construct Bollinger Bands around a moving average?

Accepted Answer

Standard deviation

Answer

Bollinger Bands are constructed by adding and subtracting a specified multiple of the standard deviation from a simple moving average.

Question 3

In a normal distribution, approximately what percentage of data falls within two standard deviations of the mean?

Accepted Answer

95%

Answer

By the empirical rule, approximately 95% of data in a normal distribution falls within two standard deviations of the mean.

Question 4

What does R-squared (R²) measure when linear regression is applied to price data?

Accepted Answer

The proportion of price variance explained by the regression model

Answer

R-squared, the coefficient of determination, measures the proportion of variance in the dependent variable (price) that is explained by the independent variable(s) in the model.

Question 5

What does a Z-score tell a technical analyst about a data point?

Accepted Answer

How many standard deviations the data point lies above or below the mean

Answer

A Z-score measures how many standard deviations a data point is from the mean, allowing analysts to identify statistically unusual price levels.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Statistical & Quantitative Methods 1