CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

An analyst gathered the following information about two common stocks:

Variance of returns for Company A = 15.5
Variance of returns for Company B = 22.3
Covariance between returns of Company A and B = 8.65

The correlation coefficient between returns for the two common stocks is closest to ______.
A. 0.25
B. 0.39
C. 0.47
Explanation: Standard deviation of A = 15.51/2 = 3.937
Standard deviation of B = 22.31/2 = 4.722
Correlation between A and B = 8.65/(3.937 4.722) = 0.465

User Contributed Comments 1

User Comment
Mclarke variance ^1/2 = standard deviation in this case?
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