Question: Can you please solve for covariance and correlation between the two stocks? Based on the following information: State of Economy Probability of State of Economy
Can you please solve for covariance and correlation between the two stocks?
| Based on the following information: |
| State of Economy | Probability of State of Economy | Return on Stock J | Return on Stock K |
|---|---|---|---|
| Bear | .28 | .023 | .031 |
| Normal | .63 | .135 | .059 |
| Bull | .09 | .215 | .089 |
| a. | Calculate the expected return for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | Calculate the standard deviation for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c. | What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) |
| d. | What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.) |
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