Using the data in the following table, estimate
(a) the average return and volatility for each stock, (5 Marks)
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(b) the covariance between the stocks, and (5 Marks)
(c) the correlation between these two stocks. (5 Marks)
(d) define standard deviation, covariance and correlation and interpret the results. (5 Marks)
year | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
Stock A | -10% | 20% | 5% | -5% | 2% | 9% |
Stock B | 21% | 7% | 30% | -3% | -8% | 25% |
[Note: you are supposed to show every step of your calculation, and use Harvard referencing]