The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period.

Month Madison Cookies Sophie Electric

1 -0.06 0.06

2 0.04 -0.02

3 -0.07 -0.11

4 0.15 0.17

5 -0.02 -0.09

6 0.06 0.02

Compute the following. Do not round intermediate calculations. Round your answers to four decimal places.

A). Average monthly rate of return R_i for each stock.

Madison Cookies:

Sophie Electric:

B). Standard deviation of returns for each stock.

1. Madison Cookies:_________
2. Sophie Electric: _________

C). Covariance between the rates of return

____________.

D). The correlation coefficient between the rates of return.

____________.

E). Would these two stocks be good choices for diversification? Why or why not?

Madison Cookies and Sophie Electric are -Select-good/bad choices for diversification as these assets have -Select-high positivehigh negativelow positivelow negative correlation.