Use the deviation from return that you calculated above to calculate the covariance and correlation coefficient of the stock and bond funds.
		Deviation from Mean Return		Covariance
Scenario	Probability	Stock Fund	Bond Fund	Product of Dev	Col B x Col E
Severe recession	0.05		-14	0	0.0
Mild recession	0.25		10	0	0.0
Normal growth	0.40		3	0	0.0
Boom	0.30		-10	0	0.0
			Covariance =	SUM:	0.0
Correlation coefficient = Covariance/(StdDev(stocks)*StdDev(bonds)) =					#DIV/0!

Stock Fund Bond Fund Deviation Rate of Variance (Squared Deviation) Column E Rate of Variance Column B Expected Expected (Squared X Return Deviatio Column I 9 Scenario 10 Severe recessio 11 Mild recession 2 Normal growth 13 Boom Prob. Column E 14 10 196 100 9.8 25 0.05 0.25 0.4 0.3 43.2 19.2 1.8 20.8 1866.24 368.64 3.24 432.64 93.312 92.16 1.296 129.792 316.6 17.8 15 12 31 -10 100 Variance SUM Variance: 68.4 15 Expected or Mean Return: Stocks 16 Expected or Mean Return: Bonds 10.2 Standard deviation = SQRT(Variance) Std. Dev