# Question: When you use RISK s correlation feature to generate correlated random

When you use @RISK’s correlation feature to generate correlated random numbers, how can you verify that they are correlated? Try the following. Use the RISKCORRMAT function to generate two normally distributed random numbers, each with mean 100 and standard deviation 10, and with correlation 0.7. To run a simulation, you need an output variable, so sum these two numbers and designate the sum as an output variable. Now run @RISK with 500 iterations. Click on @RISK’s Excel Reports button and check the Simulation Data option to see the actual simulated data.

a. Use Excel’s CORREL function to calculate the correlation between the two input variables. It should be close to 0.7. Then create a scatterplot of these two input variables. The plot should indicate a definite positive relationship.

b. Are the two input variables correlated with the output? Use Excel’s CORREL function to find out. Interpret your results intuitively.

a. Use Excel’s CORREL function to calculate the correlation between the two input variables. It should be close to 0.7. Then create a scatterplot of these two input variables. The plot should indicate a definite positive relationship.

b. Are the two input variables correlated with the output? Use Excel’s CORREL function to find out. Interpret your results intuitively.

## Answer to relevant Questions

Repeat the previous problem, but make the correlation between the two inputs equal to –0.7. Explain how the results change.Six months before its annual convention, the American Medical Association must determine how many rooms to reserve. At this time, the AMA can reserve rooms at a cost of $150 per room. The AMA believes the number of doctors ...Dilbert’s Department Store is trying to determine how many Hanson T-shirts to order. Currently the shirts are sold for $21, but at later dates the shirts will be offered at a 10% discount, then a 20% discount, then a 40% ...If the number of competitors in Example 16.1 doubles, how does the optimal bid change?The simulation output from Example 16.6 indicates that an investment heavy in stocks produces the best results. Would it be better to invest entirely in stocks? Answer this by rerunning the simulation. Is there any apparent ...Post your question