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The following are the monthly rates of return for Madison Software Corp. and for Kayleigh Electric during a six-month period. Month Madison Software Kayleigh Electric
The following are the monthly rates of return for Madison Software Corp. and for Kayleigh Electric during a six-month period. Month Madison Software Kayleigh Electric I -.04 07 2 .06 -.02 3 -07 -.10 4 .12 15 5 -.02 -.06 6 .05 .02 Compute the following: a. Expected monthly rate of return [E(R)] for each stock b. Standard deviation of returns for each stock c. The covariance between the rates of return d. The correlation coefficient between the rates of return What level of correlation did you expect? How did your expectations compare with the computed correlation? Would these two stocks offer a good chance for diversification? Why or why not
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