If the covariance of two stocks is positive, these stocks tend to move together over time.

Name: If the covariance of two stocks is positive, these stocks tend to move together over time.
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Question

Quizplus · Accepted Answer

Covariance measures the direction and strength of the linear relationship between two stocks. A positive covariance indicates that when one stock's return is above/below its mean, the other stock's return tends to be above/below its mean as well. Therefore, they tend to move together in the same direction over time.

If the Covariance of Two Stocks Is Positive, These Stocks