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2. Two stocks have the following returns. What is their correlation? Year Stock A Stock B...

2. Two stocks have the following returns. What is their correlation?

Year Stock A Stock B
2010 8.00% -8.00%
2011 9.00% -9.00%
2012 10.00% -10.00%
2013 12.00% -12.00%
2014 14.00% -14.00%
2015 16.00% -16.00%

A. -1.00

B. 1.00

C. 0.00

D. -.23

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Answer #1

Answer; Option A is correct
W Stock B 1 Year -8% Stock A 2010 2011 2012 2013 2014 2015 8% 9% 10% 12% 14% -9% -10% -12% -14% -16% 16% 9 Correlations -1 10

Hence the correlation=-1

The relationship between the returns of stock A with respect to stock B is -1 because the returns move perfectly in opposite direction with equal values.

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