A portfolio manager is interested in reducing the risk of a particular portfolio by including assets that have little, if any, correlation. He wonders whether the stock prices for the firms Apple and Google are correlated. As a very preliminary step, he collects the monthly closing stock price for each firm from January 2012 to April 2012. a. Compute the sample correlation coefficient.
B) Specify the competing hypotheses to determine whether the stock prices are correlated.
C) Calculate the value of the test statistic and approximate the corresponding p-value.
D) At the 5% significance level, what is the conclusion to the test? Explain.

Question

A portfolio manager is interested in reducing the risk of a particular portfolio by including assets that have little, if any, correlation. He wonders whether the stock prices for the firms Apple and Google are correlated. As a very preliminary step, he collects the monthly closing stock price for each firm from January 2012 to April 2012.  a. Compute the sample correlation coefficient.
B) Specify the competing hypotheses to determine whether the stock prices are correlated.
C) Calculate the value of the test statistic and approximate the corresponding p-value.
D) At the 5% significance level, what is the conclusion to the test? Explain.

Quizplus · Accepted Answer

The Answer of A portfolio manager is interested in reducing the risk of a particular portfolio by including assets that have little, if any, correlation. He wonders whether the stock prices for the firms Apple and Google are correlated. As a very preliminary step, he collects the monthly closing stock price for each firm from January 2012 to April 2012.  a. Compute the sample correlation coefficient.
B) Specify the competing hypotheses to determine whether the stock prices are correlated.
C) Calculate the value of the test statistic and approximate the corresponding p-value.
D) At the 5% significance level, what is the conclusion to the test? Explain.

A Portfolio Manager Is Interested in Reducing the Risk of a Particular