Question
Your friend, who just started working for an investment firm has texted you asking for help with a problem. Her boss asked her to investigate
Your friend, who just started working for an investment firm has texted you asking for help with a problem. Her boss asked her to investigate whether TESLA is really an automotive stocks, by studying the stock's comovement with a traditional industry leader, General Motors (GM). She has collected last month's worth of their respective stock prices but is stuck and can't figure out how to calculate the covariance/correlation between the two stocks and also needs help interpreting the results.
1. Help your friend by calculating both the variance and covariance of the two price series (use Excel).
2. Also, help her interpret the results. Does TESLA stock move like GM?
3. Here is the data (available in the attached Excel file, since you would want to use Excel for this task)
| Date | GM | TESLA |
| 10/2/2020 | 35.88 | 334.87 |
| 10/3/20 | 35.53 | 336.2 |
| 10/4/20 | 35.8 | 333.03 |
| 10/5/20 | 35.31 | 330.37 |
| 10/6/20 | 35.54 | 335.89 |
| 10/9/20 | 35.38 | 339.53 |
| 10/10/20 | 35.11 | 348.84 |
| 10/11/20 | 35.24 | 352.7 |
| 10/12/20 | 36.1 | 359.68 |
| 10/13/20 | 35.65 | 358.39 |
| 10/16/20 | 36.11 | 381.5 |
| 10/17/20 | 36.31 | 378.99 |
| 10/18/20 | 37.31 | 393.15 |
| 10/19/20 | 37.26 | 404.04 |
| 10/20/20 | 37.25 | 405.59 |
| 10/23/20 | 36.77 | 419.22 |
| 10/24/20 | 36.58 | 425.25 |
| 10/26/20 | 36.48 | 430.94 |
| 10/27/20 | 36.56 | 430.38 |
| 10/30/20 | 36.44 | 414.7 |
| 10/31/20 | 36.6 | 418.33 |
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