CFA® Level I question of the day
15 October 2026 · Quantitative Methods
Why can covariance not be compared across pairs of variables?
Show the answer and explanation
Answer: C. Because its magnitude depends on the units of both variables
Correlation exists precisely to fix that, by producing a unitless figure.
- A. Because it may be negative - Correlation may also be negative, and comparing negative numbers is no harder. The obstacle is scale, not sign.
- B. Because it requires a large sample - Any estimate is better with more data. That applies equally to correlation, which is comparable across pairs regardless.
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Notes, formulas and a worked question for every learning outcome are on the Quantitative Methods page, with the whole CFA Level I syllabus alongside.