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Consider two stocks: Stock A and Stock B. Suppose that there are only 4 possible pairs of returns for these two stocks over the course

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Consider two stocks: Stock A and Stock B. Suppose that there are only 4 possible pairs of returns for these two stocks over the course of the next year. These pairs, and the probability of each one occurring, are provided in the table below. Calculate the correlation between the returns of these two stocks. Probability 0.20 0.30 10.30 0.20 Stock A -25% -11% 13% 30% Stock B - 1% - 14% 20% 2% 0.4430 0.4008 0.4852 0.5274 0.3586

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