Question: Covariance Joint Probability Return on Security A Return on Security C 5/20 = .25 2% 4% 4/20 = .20 4% 10% 8/20 = .40 6%

Covariance

Joint Probability

Return on Security A

Return on Security C

5/20 = .25

2%

4%

4/20 = .20

4%

10%

8/20 = .40

6%

4%

2/20 = .10

8%

10%

1/20 = .05

10%

8%
  • What is the expected or Mean Return for A and C?
  • What is the variance of return for A and C (for each)?
  • What is the covariance of Return between Security A and Security C?
  • State any Correlation?

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