The covariance of two stocks was calculated at -.01733.If the standard deviation of the first stock is .106 and .164 for the second, determine the correlation.
A)-.997
B)-.887
C)-.687
D)-.587

Question

Quizplus · Accepted Answer

The correlation is calculated by dividing the covariance by the product of the standard deviations of the two stocks: correlation = covariance / (std_dev1 * std_dev2) = -0.01733 / (0.106 * 0.164) = -0.997.

The Covariance of Two Stocks Was Calculated at -