Consider two stocks with the following decomposition on the market index: The volatility of the market index

Question:

Consider two with the following decomposition on the market index:

Consider two stocks with the following decomposition on the market

The volatility of the market index is 0.15. Compute the covariance matrix using the diagonal and beta models. What is the correlation between the stocks?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...