- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 3. Probability Concepts
- Subject 7. Expected Value, Variance, Standard Deviation, Covariances, and Correlations of Portfolio Returns
CFA Practice Question
Consider the following covariance matrix for 3 different variables, X, Y, and Z:
B. 7, 9, 5
C. 4, 9, 7
What are the values for Cov(Y,Z), Cov(Z,X), and Cov(Y,X)?
A. 9, 5, 7
B. 7, 9, 5
C. 4, 9, 7
Correct Answer: B
Cov(Y,Z) = Cov(Z,Y) = 7, Cov(Z,X) = Cov(X,Z) = 9, and Cov(Y,X) = Cov(X,Y) = 5. Therefore, the complete correlation matrix looks like this:
User Contributed Comments 6
| User | Comment |
|---|---|
| chamad | Remember:Cov are symetric around The Diagonale |
| abhinavkapoor | can somebody please explain it? |
| abhinavkapoor | GOT IT. |
| dmfz | This makes no sense |
| idzani | More like an IQ test than comprehension test lol |
| ashish100 | I'll give one example then move on. Cov (Y,Z) = Cov (Z,Y) Cov (Z,Y) = 7. This is given. Therefore Cov (Y,Z) = 7 as well. Do the same for the rest. |