Calculate the covariance and correlation coefficient between the two securities of a portfolio that has 40 percent

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Calculate the covariance and correlation coefficient between the two securities of a portfolio that has 40 percent in stock X (with an expected return of 40 percent and a standard deviation of 12 percent) and 60 percent in stock Y (with an expected return of 30 percent and a standard deviation of 15 percent). The portfolio standard deviation is 6 percent.


Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Introduction To Corporate Finance

ISBN: 9781118300763

3rd Edition

Authors: Laurence Booth, Sean Cleary

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