Question

^{Stock X Year Stock Y unanswered 8.00% -16.00% not_submitted 12.00% 2 -5.00% 14.00% 0.00% 4 4.00% 5.00% What is the covariance of the returns of Stock X with the returns of Stock Y? Submit Answer format: Number: Round to: 6 decimal places.}

Answer 1

			Stock X	Stock Y
Year	Stock X	Stock Y	Return - Average	Return - Average	Product of (Return - Average)Stock X*Stock Y
1	0.08	-0.16	0.0275	-0.1625	-0.00446875
2	-0.05	0.12	-0.1025	0.1175	-0.01204375
3	0.14	0	0.0875	-0.0025	-0.00021875
4	0.04	0.05	-0.0125	0.0475	-0.00059375
Average	0.0525	0.0025		SUM	-0.01732500
The sum of the product of (Return - Average)StockX*StockY = -.017325
Covariance = -.017325/n-1
where n is the number of years
Covariance = -.017325/3
Covariance = -.005780
The covariance of the returns of stock X with the returns of stock Y = -.005780