Beef Stock returns have exhibited a standard deviation of 0.57, whereas Sheep Stock returns have a standard deviation of 0.63. The correlation coefficient between the returns is 0.078042. What is the covariance of the returns?
A) 0.028025.
B) 0.217327.
C) 0.359100.
D) 0.993094.

Question

Quizplus · Accepted Answer

Covariance is calculated as the product of the standard deviations of the two variables and their correlation coefficient. Thus, Covariance = 0.57 * 0.63 * 0.078042 = 0.028025.

Beef Stock Returns Have Exhibited a Standard Deviation of 0