Question
As a new analyst, you have calculated the following annual rates of return for the stocks of both Lauren Corporation and Kayleigh Industries. Year Laurens
As a new analyst, you have calculated the following annual rates of return for the stocks of both Lauren Corporation and Kayleigh Industries. Year Laurens Rate of Return Kayleighs Rate of Return 2007 5 5 2008 12 15 2009 11 5 2010 10 7 2011 12 10 Your manager suggests that because these companies produce similar products, you should continue your analysis by computing their covariance and coefficient of correlation. Calculate covariance and correlation for both companies and explain, would the combination of the common stock of Lauren and Kayleigh be good for diversification?
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