Question

The standard deviation of return on investment A is 10%, while the standard deviation of return on investment B is 5%. If the covariance of returns on A and B is .0030, the correlation coefficient between the returns on A and B is _________.

Answer 1

Answer:

The answer is 60.

Explanation:

The First step in solving the example given, is to recall the following steps to be taken

The standard deviation of return on investment A =10%

The standard deviation of return on investment B =5%

The co-variance of returns both on A and B =.0030

The next step is as follows

co-variance = correlation

.0030 (.05 x .10) =  60

Therefore the correlation coefficient between the returns of A and B is 60