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The covariance of the returns between Stock A and Stock B is 0.0087. The standard deviation of Stock A is 0.26, and the standard deviation of Stock B is 0.37. What is the correlation coefficient between the returns of the two stocks?

Respuesta :

Answer:

correlation coefficient 0.0904

Explanation:

correlation coefficient can be calculated by using given relation:

[tex]correlation\ coefficient = \frac{Covariance}{(standard\ deviation\ of\ Stock A * standard\ deviation\ of\ Stock\ B )}[/tex]

co variance of the returns = 0.0087

standard deviation (Stock A) = 0.26

standard deviation (Stock B) =  0.37

= 0.0087 / (0.26*0.37)

= .0087 / 0.0962

= 0.0904

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