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An Investor Has Calculated the Covariance Between a Utility ETF

question 34

Essay

An investor has calculated the covariance between a utility ETF and a bank ETF at 124. The variance of the utility ETF is 398 and the variance of the bank ETF is 548. Find the correlation between the two ETFs.


Definitions:

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity.

Capital Structure

The mix of debt and equity financing used by a company to finance its overall operations and growth.

Expected State

Refers to the predicted condition or status of an entity or economy based on current trends or models.

Unlever

The process of reducing or eliminating leverage (debt) within a company's capital structure.

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