(a) Use the monthly rates of return for both GM and Ford listed in Fig. 6.11 to calculate the correlation coefficient between the monthly rates of return for these two companies.

(b) Using the results you obtained in part

(a) and some other statistics listed in Fig. 6.11, discuss how these two securities are related and how this information can be used to make investment decisions.

Fig. 6.11

Transcribed Image Text:

Data Display JNJ -0.681455 0.735557 0.329385 -0.132041 -0.276278 0.120214 -0.119259 0.001873 -0.017184 0.101555 0.286313 -0.619442 0.362091 -0.155059 -0.087818 0.491250 0.272454 0.165022 0.162139 -0.289582 0.230108 0.616842 -0.551293 -0.091578 0.244915 0.584558 -0.409758 0.340804 0.287688 0.124207 0.139719 -0.431191 -0.078010 -0.021172 0.248595 -0.032496 0.122480 0.034602 -0.076435 0.108473