- 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

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**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:

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**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. |