Horse Stock returns have exhibited a standard deviation of 0.57, whereas Mod T Stock returns have a standard deviation of 0.63. The correlation coefficient between the returns is 0.078042. What is the covariance of the returns?
A) 0.028025
B) 0.217327
C) 0.359100
D) 0.993094

Question

Quizplus · Accepted Answer

Covariance is calculated as the product of the correlation coefficient and the standard deviations of the two stocks: 0.078042 * 0.57 * 0.63 = 0.028025.

Horse Stock Returns Have Exhibited a Standard Deviation of 0