The Covariance and Correlation. Introduction : Covariance simplifies the idea of change to different arbitrary variables. Rather than estimating the vacillation of solitary arbitrary variables, it also measures the change of two factors with each other. Correlation is a numerical connection between the prices of asset. A correlation is positive if the shifts between the two or more variables are a similar way and negative if the variable shifts in opposite path. Zero correlation means there is no correlation between the variables.

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Chapter 11, Problem 26QP

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To determine: The Covariance and Correlation.

Introduction: Covariance simplifies the idea of change to different arbitrary variables. Rather than estimating the vacillation of solitary arbitrary variables, it also measures the change of two factors with each other. Correlation is a numerical connection between the prices of asset. A correlation is positive if the shifts between the two or more variables are a similar way and negative if the variable shifts in opposite path. Zero correlation means there is no correlation between the variables.

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