Correlation between the returns of the two stocks

Assignment Help Financial Management

Reference no: EM13870782

It must be A,B,C to be correct below.

Based on the following information determine the covariance and correlation between the returns of the two stocks.

State of Economy Probability of State of Economy Return of X Return of Y

Bear 0.10 -0.02 0.034

Normal 0.65 0.138 0.062

Bull 0.25 0.218 0.092

A) Cov = 0.001023, Corr=0.9547

B) Cov = 0.001023, Corr=0.00027

C) Cov= 0.001144, Corr=0.9391

Reference no: EM13870782

Questions Cloud

Calculate net patient service revenue : Calculate net patient service revenue (dollars in thousands), using the information below. The table below is a list of accounts at December 31, 2012, for healthy clinic (Dollars are in thousands)

What is your estimate of the stocks current price : A company currently pays a dividend of $2 per share. It is estimated that the company's dividend will grow at a rate of20% per year for the next two years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk-..

The bonds make annual payments : Staind, Inc., has 6 percent coupon bonds on the market that have 13 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 11 percent, what is the current bond price?

Evaluate future of the competitive environment of air travel : Evaluate the future of the competitive environment of air travel. Account for the differences in fortunes between Amazon and W.H. Smith. What are the benefits of physical, online and e-sales to consumers and retailers?

Correlation between the returns of the two stocks : Based on the following information determine the covariance and correlation between the returns of the two stocks.

What principle should the hrm department have : What principle should the HRM department have to ensure work efficiency while protecting employee privacy? How does your organization define employee privacy with regard to technology

Calculate the cost of equity : Using the DCF method, calculate the cost of equity. Using the SML method, calculate the cost of equity.

What is the portfolio expected return : You have decided to invest 30 percent in X; 30 percent in Y; and 40 percent in Z. The probability of the state of the economy is Boom 20%; Normal 55%; and, Bust 25%. The rate of return for stock X is Boom .15; Normal .10; and, Bust .00. What is the p..

What is the expected return on the market and risk-free rate : You have been given the following information on two corporations; you are to assume that the securities are correctly priced. My Corp, Inc. has a Beta of 1.35 and an Expected Return of .075; Your Corp, Inc. has a Beta of .65 and an Expected Return o..

User Account

All Pages