If the covariance between two stocks is 115 and the standard deviation of both stocks are 17 and -8 respectively, what is the Correlation Coefficient between the two stocks?
A) 0.18
B) 0.85
C) -0.85
D) There is not enough information to calculate the Correlation Coefficient.

Question

Quizplus · Accepted Answer

Correlation Coefficient (ρ) = Covariance / (Standard deviation of stock A * Standard deviation of stock B)
ρ = 115 / (17 * 8) = 0.85 (Note that the standard deviation can't be negative, so we take the absolute value) 
Therefore, the correlation coefficient between the two stocks is 0.85, which is option B.

If the Covariance Between Two Stocks Is 115 and the Standard