What correlation doesn’t say. Investment reports now often include correlations. Following a table of correlations among mutual funds, a report adds: “Two funds can have perfect correlation, yet different levels of risk. For example, Fund A and Fund B may be perfectly correlated, yet Fund A moves 20% whenever Fund B moves 10%.” Write a brief explanation, for someone who knows no statistics, of how this can happen.

Include a sketch to illustrate your explanation.