Consider the table below, which describes the rate of economic growth (X) and the rate of return on the S&P (Y). Assume that X & Y are discrete random variables. Economic Growth, % X S&P Returns, % Y 4.8 3.8 3.5 4.6 4.2 7.2 3.6 5.1 a) Compute the covariance between the returns of the S&P and economic growth . b) Compute the correlation coefficient and interpret your findings .

Consider the table below, which describes the rate of economic growth (X) and the rate of return on the S&P (Y). Assume that X & Y are discrete random variables. Economic Growth, % X S&P Returns, % Y 4.8 3.8 3.5 4.6 4.2 7.2 3.6 5.1 a) Compute the covariance between the returns of the S&P and economic growth . b) Compute the correlation coefficient and interpret your findings .

Holt Mcdougal Larson Pre-algebra: Student Edition 2012

1st Edition

ISBN:9780547587776

Author:HOLT MCDOUGAL

Publisher:HOLT MCDOUGAL

Chapter11: Data Analysis And Probability

Section: Chapter Questions

Problem 8CR

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Question

Consider the table below, which describes the rate of economic growth (X) and the rate of return on the S&P (Y). Assume that X & Y are discrete random variables.

Economic Growth, % X	S&P Returns, % Y
4.8	3.8
3.5	4.6
4.2	7.2
3.6	5.1

a) Compute the covariance between the returns of the S&P and economic growth .

b) Compute the correlation coefficient and interpret your findings .

Definition Definition Statistical measure used to assess the strength and direction of relationships between two variables. Correlation coefficients range between -1 and 1. A coefficient value of 0 indicates that there is no relationship between the variables, whereas a -1 or 1 indicates that there is a perfect negative or positive correlation.

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