An investor is analyzing two stocks: stock A and stock B. He estimates the following probabilities of return depending on the state of economy: State of economy Probability Return of Stock A Return of Stock B Expansion 0.25 15% 5% Normal 0.6 8% 10% Recession 0.15 -5% 12%

Question 10: Calculate the correlation between stock A and stock B, respectively. A. Correlation: 0.66 B. Correlation: 0.76 C. Correlation: 0.86 D. Correlation: -0.66 E. Correlation: -0.76 F. Correlation: -0.86