Two Stocks, a and B, Have a Historical Correlation Indistinguishable

question 121

Short Answer

Two stocks, A and B, have a historical correlation indistinguishable from zero. The probability that stock A increases next year is 0.2, and the probability that stock B increases next year is 0.4. Calculate the probability that A and B both increase next year.

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Definitions:

Decreasing

A trend or process of becoming less in size, amount, number, or degree.

Negative

Characterized by or expressing disapproval or pessimism.

Increasing

Describes a situation or quantity that is growing or becoming larger in size, value, or intensity over a period of time.

Consumption

The act of using goods and services to satisfy human desires, which plays a central role in economic theories and the measurement of economic health.