2.137 What correlation does and doesn't say
Construct a set of data with two variables that have different means and correlation equal to one. Use your example to illustrate what correlation does and doesn't say.
2.137
A correlation measures the strength of a linear relationship, or, that is to say, the relationship between Fund A and Fund B is consistent along a straight line. It doesn't mean they have to change by the same amount or a slope of 1. So as long as Fund A moves 20% and Fund B moves 10% consistently, up or down, you will still remain on the same regression line, and they will remain perfectly correlated.