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Table 7.9 shows standard deviations and correlation coefficients for eight stocks from dif...

Table 7.9 shows standard deviations and correlation coefficients for eight stocks from different countries. Calculate the variance of a portfolio with equal investments in each stock.

TABLE7.9 Standard deviations of returns and correlation coefficients for a sample of eight stocks.

Correlation Coefficients

 

BP

Canadian Pacific

Deutsche Bank

Fiat

Heineken

LVMH

Nestlé;

Tata Motors

Standard Deviation

BP

1

0.19

0.23

0.20

0.34

0.30

0.16

0.09

22.2%

Canadian Pacific

 

1

0.43

0.31

0.39

0.34

0.17

0.40

23.9

Deutsche Bank

 

 

1

0.74

0.73

0.73

0.49

0.68

29.2

Fiat

 

 

 

1

0.66

0.64

0.47

0.53

35.7

Heineken

 

 

 

 

1

0.64

0.51

0.50

18.9

LVMH

 

 

 

 

 

1

0.52

0.60

20.8

Nestlé

 

 

 

 

 

 

1

0.43

15.4

Tata Motors

 

 

 

 

 

 

 

1

43.0

Note: Correlations and standard deviations are calculated using returns in each country’s own currency; in other words, they assume that the investor is protected against exchanger isk.

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