QUESTION $1(15$ MARKS$)$

As a new analyst, you have calculated the following annual rates of return for the stocks of both

Land & General Berhad $("$L&G$")$ and Kemayan Company Berhad $("$Kemayan$").$

Required:

$($a$)$ Your manager suggests that because these companies produce similar products, you should

continue your analysis by computing their Covariance. Show all calculations.

$(5$ marks$)$

$($b$)$ Calculate the Coefficient of Correlation using the data provided in part $($a$)$ above. Show all

calculations.

$(7$ marks$)$

$($c$)$ Discuss if the combination of L&G common stock and Kemayan common stock would be

beneficial for diversification.