CFA Practice Question

CFA Practice Question

Two securities were analyzed and the following sample statistics were found: Var1 = 23.5; Var2 = 44.6; Covariance12 = 23.3.

What is the correlation co-efficient between securities 1 and 2?
A. 0.02
B. 0.72
C. 0.52
Explanation: Corrln12 = Cov12/(SD1 x SD2) = 23.3/Sqrt(23.5 x 44.6) = 0.72.

User Contributed Comments 5

User Comment
PedroEdmundo don't agree: correlation=cov12/rootsquare(var1*var2), thus the answer is A
volkovv pedro's formula is correct, but its the same formula that is given in the explanation, and B is correct answer

Dinosaur I think A is if you forget to square root the variances to get to std devs
Oarona Pedro's formula is wrong
SKIA Yes, do not VOTE FOR PEDRO - he's wrong
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