The correlation coefficient is “a standardized measure of the relationship between two variables ranging from -1.00 to +1.00. (Brown and Reilly, 2009, p1016) It is a statistical concept.a) Firstly, I need to refer to two assets that have a high positive correlation. In other words, if an upward (upward) or downward (downward) movement in an asset tends to also be accompanied by an upward or downward movement in other asset. For example, the FTSE100 has a highly positive correlation with the FTSE350. According to Levy, H. and Post, T. (2005), the correlation between these two indices is 0.95 (p.194). This is because these two assets belong to the same market sector. Additionally, 100 of the 350 stocks are identical. Therefore, if there is a significant rise or fall in bond prices for the FTSE100, the same changes will also occur for FTSE350 bonds. Therefore, the correlation coefficient is definitely high. b) On the other hand, when an upward or downward movement of one security tends to be followed by a slightly upward or downward movement of another security, they are said to have a low positive level. Correlation. For example, Barclays and O2 are two companies that I personally believe have a low positive correlation. Firstly, my opinion is based on the fact that Barclays is a banking company and O2 is a telecommunications company. These are therefore two companies which belong to two different market sectors, they are non-competitive companies. As a result, the correlation coefficient between these two activities is a weak positive correlation. According to Levy, H. and Post, T. (2005), mean-variance theory is "the evaluation of investment strategies based on exp...... middle of paper ..... . They try to track an index – usually the FTSE All-Share or FTSE 100 – which measures the performance of all or part of the stock market. If the market is doing well, the tracker is doing well. If it malfunctions, the tracker malfunctions.” (p.386). In other words, it is a means of collective investment allowing you to track the performance of a specific index. Furthermore, the most important advantage of these funds is that they are cheap because they simply do what the market does and managers do not need to invest in big bets to outperform them. Additionally, I personally believe that Index Tracker Funds are suitable assets for those who believe the CAPM and its assumptions are correct. model.