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?
A) 0.090437
B) 0.096200
C) 0.90437
D) 0.96200

Question

Quizplus · Accepted Answer

The correlation coefficient is calculated as the covariance divided by the product of the standard deviations. In this case, the correlation coefficient is 0.0087 / (0.26 * 0.37) = 0.090437.

The Covariance of the Returns Between Stock a and Stock