____ is a statistical measure of the relationship between two random variables such as the returns on stock x and stock y.
A) Standard deviation
B) Arithmetic mean
C) Variance
D) Covariance

Question

Quizplus · Accepted Answer

Covariance is a statistical measure that measures how two variables move together. In finance, it is often used to measure the relationship between the returns on two stocks. A positive covariance indicates that the variables move in the same direction while a negative covariance indicates that the variables move in opposite directions. However, the magnitude of the covariance does not provide an indication of the strength of the relationship between the variables, which is why correlation is often used alongside covariance for analysis.

____ Is a Statistical Measure of the Relationship Between Two