The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .05.If the covariance of returns on A and B is .0030,the correlation coefficient between the returns on A and B is _________.
A) .12
B) .36
C) .60
D) .77

Question

Quizplus · Accepted Answer

The correlation coefficient is calculated as the covariance divided by the product of the standard deviations of the two investments: Correlation = Covariance / (StdDev_A * StdDev_B) = 0.0030 / (0.10 * 0.05) = 0.60.

The Standard Deviation of Return on Investment a Is