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Suppose there are two stocks and two possible states. The first state happens with 85% probability and second state happens with 15% probability. In outcome
Suppose there are two stocks and two possible states. The first state happens with 85% probability and second state happens with 15% probability. In outcome 1, stock A has 1% return and stock B has 12% return. In outcome 2, stock A has 80% return and stock B has -10% return. What is the correlation of their returns?
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