The Excel file Stock Data contains monthly price data for five (5) stocks.

a.Compute the Correlation Matrix for the returns of the five (5) stocks using continuous returns.

b. All other things being equal, which pair of stocks would reduce portfolio risk the most?

c.All other things being equal, which pair of stocks would reduce portfolio risk the least?

d. Identify and explain the two components of a linear relationship that correlation measures.

Stock Data
	PRICES FOR 5 STOCKS
Month	MCD	MSFT	AAPL	GE	BAC
1	50.00	17.25	105.12	11.00	14.00
2	48.83	19.02	125.83	11.65	12.00
3	54.05	19.74	135.81	12.41	11.16
4	53.11	22.46	142.43	10.88	13.08
5	50.86	22.22	163.39	12.44	14.66
6	52.41	23.42	168.21	12.90	17.43
7	53.19	24.44	185.35	15.33	16.78
8	54.62	26.34	188.50	13.32	14.46
9	59.45	28.06	199.91	14.96	15.72
10	58.69	29.09	210.73	14.22	14.94
11	58.68	26.89	192.06	15.11	15.06
12	60.53	27.49	204.62	15.19	16.53
13	63.25	28.08	235.00	17.21	17.72
14	66.92	29.28	261.09	18.00	18.00
15	63.92	24.85	260.00	19.00	19.00
16	64.00	25.00	275.00	20.00	21.00
17	68.00	27.00	278.00	22.00	22.00
18	72.00	24.00	280.00	23.00	24.00
19	75.00	25.00	285.00	24.00	26.00