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1. How is correlation measured? 2. What is the importance of correlation in investment theory? 3. In Excel use a function = CORREL(highlight the first

1. How is correlation measured?
2. What is the importance of correlation in investment theory?
3. In Excel use a function = CORREL(highlight the first array of data: Market Return, second array of data: Stock A return).
Year Market Return,% Stock A return, %
2010 -6 -1
2011 1 0
2012 5 3
2013 -3 2
2014 0 5
2015 10 9
Find the correlation coefficient. Explain what that number means regarding stock A and market rate of return.

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