When Performing a Linear Regression of the Relationship Between Changes

Multiple Choice

When performing a linear regression of the relationship between changes in spot prices and changes in futures prices, what does R² = 0 indicate?

A) Changes in the spot rate and changes in the futures price are perfectly correlated.
B) All observations between changes in spot rate and changes in futures price lie on a straight line.
C) The spot and future exchange rates are expected to move imperfectly together.
D) The FI must sell a greater number of futures to hedge the cash position.
E) There is no statistical association between changes in spot rates and changes in futures price.