The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a

Question:

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

Compute the following.
a. Average monthly rate of return Ri for each stock
b. Standard deviation of returns for each stock
c. 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 be good choices for diversification? Why or why not?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...