Stock M and Stock N have had the following returns for the past three years: -12%,10%,32%; and 15%,6%,24%,respectively.Calculate the covariance between the two securities.
A)-99
B)+99
C)+250
D)-250E

Question

Quizplus · Accepted Answer

The covariance is calculated by finding the average of the products of the deviations of each stock's returns from their respective means. The calculation yields a positive covariance of +99, indicating that the returns of Stock M and Stock N tend to move together.

Stock M and Stock N Have Had the Following Returns