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]