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Correlation Covariance Stocks A&B 0.149261489 0.003083791 Stocks A&C 0.25849847 0.005340662 Stocks B&C 0.292146203 0.004311003 Note: The data above for Stock Assets A,B,C was calculated using

Correlation Covariance

Stocks A&B

0.149261489

0.003083791

Stocks A&C

0.25849847

0.005340662

Stocks B&C

0.292146203

0.004311003

Note: The data above for Stock Assets A,B,C was calculated using the Single Index Model Approach. (SIM)

Question:

What does the data above tell us about the appropriateness of the SIM for portfolio construction? What further analysis, if any, should you undertake to assess the appropriateness of the SIM?

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