The Correlation Coefficient Between Two Assets Equals to _________

question 84

Multiple Choice

The correlation coefficient between two assets equals to _________.

• A) their covariance divided by the product of their variances
• B) the product of their variances divided by their covariance
• C) the sum of their expected returns divided by their covariance
• D) their covariance divided by the product of their standard deviations

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded equals the quantity of the good supplied.

Elastic Supply

A situation where the quantity supplied of a good or service changes significantly in response to changes in price.

Cross Elasticity

A measure of how the demand for one good responds to a change in the price of another good, indicating the degree of substitutability or complementarity between the two goods.

Complements

Goods or services that are used together, where the increase in consumption of one leads to an increase in consumption of the other.