The covariance of two stocks was calculated at -.01733.If the standard deviation of the first stock is .106 and .164 for the second, determine the covariance.
A)-.997
B)-.887
C)-.687
D)-.587

Question

Quizplus · Accepted Answer

Using the formula for covariance:
covariance = correlation coefficient * (standard deviation of first stock) * (standard deviation of second stock)
covariance = -.01733 * .106 * .164
covariance ≈ -.000287
Rounding to three decimal places, the closest answer choice is C) -.687.

The Covariance of Two Stocks Was Calculated at -