Answered: You develop the following covariance…

You develop the following covariance matrix of returns Hedge Fund Market Index Hedge Fund 64 42 Market Index 42 36 The correlation of returns between the hedge fund and the market index is closest to

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 12MC: Calculate the correlation coefficient between Blandy and the market. Use this and the previously...

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

You develop the following covariance matrix of returns

	Hedge Fund	Market Index
Hedge Fund	64	42
Market Index	42	36

The correlation of returns between the hedge fund and the market index is closest to

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