Question
Asked Nov 10, 2019
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the variance of stock A is .004, the variance of the market .007 and the covariance between the two is .0026. what is the correlation coefficient?

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Expert Answer

Step 1

Given that the variance of stock A is 0.004, and variance of the market is 0.007. First we need to calculate the standard deviation of stock A and the market.

Step 2
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Standard deviation=v(Variance) So, for stock A, standard deviation=v(0.004)=0.063246 Standard deviation of the market=V(0.007)=0.083666

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Step 3

Given that, the covariance between stock A and the market is 0.002...

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