Based on the following information, calculate the expected return and standard deviation of each of the following

Question:

Based on the following information, calculate the expected return and standard deviation of each of the following stocks. Assume each state of the economy is equally likely to happen. What are the covariance and correlation between the returns of the two stocks?

State of Return on Return on

Economy Stock A Stock B

Bear.......................0.108..................................−.067

Normal....................0.126..................................0.113

Bull........................0.064.................................0.276

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...