Two Securities Have a Covariance of 0

question 21

Multiple Choice

Two securities have a covariance of 0.076. If their respective standard deviations are 13% and 22%, what is their correlation coefficient?

• A) 0.22
• B) 0.38
• C) 0.58
• D) 0.72
• E) 0.95

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of another item, typically used to express items as a percentage of total sales or total assets.

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities, and equities) is represented as a proportion of the total account.

Total Liabilities

The combined amount of debts and obligations that a company owes to others, reported on its balance sheet.

Total Assets

The sum of all current and non-current assets owned by a company, reflecting the company’s total resources that can be used to generate revenue.