The Covariance Between the Returns of Stock a and Stock

question 6

Multiple Choice

The covariance between the returns of stock A and stock B is -125. The standard deviation of the rates of return is 20 for stock A and 10 for stock B. The correlation coefficient of the rates of return between A and B is closest to ________.

• A) -0.625
• B) -0.375
• C) 0.375
• D) 0.625

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Definitions:

Philadelphia

A historic city in the United States, known for its significant role in American history, particularly during the Revolutionary War.

1790s

The decade from 1790 to 1799, notable for significant political and social changes globally, including the French Revolution.

War on Britain

is a broad term that could refer to various conflicts involving Britain, but without a specific context, it is too vague to accurately define.

War of 1812

A military conflict fought between the United States and Great Britain from 1812 to 1815, largely over issues of trade and impressment.