11. Calculate the covariance and correlation coefficient of the two stocks’ mont
ID: 2744295 • Letter: 1
Question
11. Calculate the covariance and correlation coefficient of the two stocks’ monthly returns with each other and with the returns of the S&P 500 index.
Which company’s returns are more closely correlated with the returns of the index?
Month Monthly Returns (%) Month Monthly Returns (%) Month Monthly Returns (%) Ended Yahoo Google S&P500 Ended Yahoo Google S&P500 Ended Yahoo Google S&P500 7-Dec -13.241 -0.219 -0.692 6-Dec -5.442 -5.018 1.403 5-Dec -2.61 2.457 0.036 7-Nov -13.794 -1.98 -4.182 6-Nov 2.544 1.767 1.899 5-Nov 8.818 8.806 3.778 7-Oct 15.861 24.632 1.59 6-Oct 4.193 18.534 3.257 5-Oct 9.249 17.595 -1.668 7-Sep 18.093 10.096 3.736 6-Sep -12.314 6.174 2.575 5-Sep 1.561 10.65 0.81 7-Aug -2.237 1.029 1.497 6-Aug 6.227 -2.087 2.376 5-Aug -0.06 -0.612 -0.912 7-Jul -14.302 -2.43 -3.097 6-Jul -17.758 -7.805 0.616 5-Jul -3.781 -2.172 3.717 7-Jun -5.47 4.979 -1.66 6-Jun 4.463 12.778 0.133 5-Jun -6.855 6.088 0.143 7-May 2.354 5.628 3.486 6-May -3.63 -11.035 -2.875 5-May 7.826 26.032 3.179 7-Apr -10.387 2.885 4.428 6-Apr 1.612 7.164 1.342 5-Apr 1.77 21.877 -1.896 7-Mar 1.393 1.938 1.116 6-Mar 0.624 7.551 1.244 5-Mar 5.051 -3.979 -1.769 7-Feb 9.007 -10.379 -1.95 6-Feb -6.735 -16.188 0.271 5-Feb -8.35 -3.9 2.103 7-Jan 10.846 8.908 1.511 6-Jan -12.264 4.291 2.648 5-Jan -6.555 1.468 -2.437Explanation / Answer
The correlation coefficient and Covariance of Google is greater and that makes it more closely correlated to the market
Correlation coeff Covariance Yahoo 0.2530 4.85 Google 0.2826 5.97Related Questions
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