Uptown Markets stock has a standard deviation of 16.8 percent and a covariance with the market of .0178.The market has a standard deviation of 13.6 percent.What is the correlation of this stock with the market?
A).74
B).78
C).87
D).89
E).91

Question

Quizplus · Accepted Answer

The correlation between the stock and the market can be calculated using the formula:

Correlation = Covariance / (Standard Deviation of Stock * Standard Deviation of Market)

Plugging in the given values:

Correlation = .0178 / (0.168 * 0.136) = 0.781

Rounding to two decimal places, the correlation is 0.78, which corresponds to choice B.

Uptown Markets Stock Has a Standard Deviation of 16