Stock P and stock Q have had annual returns of -10%, 12%, 28% and 8%, 13%, 24%
Respectively. Calculate the covariance of return between the securities.
A) -149
B) +149
C) 100
D) None of the above

Question

Quizplus · Accepted Answer

The covariance is calculated by finding the average of the products of the deviations of each pair of returns from their respective means. The calculation results in a positive covariance of +149, indicating that the returns of the two stocks tend to move together.

Stock P and Stock Q Have Had Annual Returns of -10