Question

In: Statistics and Probability

Please answer both of the following Two stocks are being considered for a portfolio. We are...

Please answer both of the following

Two stocks are being considered for a portfolio. We are interested to see if there is a relationship between the two stocks. The covariance for stocks x & y is -1.84. The standard deviation of stock x is 1.25 and the standard deviation of stock y is 1.65. What is the correlation coefficient for the two stocks?

A. -1.47

B. -.6344

C. -.892

D.-.40

Given the following Discrete Distribution, what is the expected value (E(x))?

x f(x)

35 .20

55 .50

20 .30

A. 40.5

B. 55

C. 36.67

D. 28

Expert Solution

# First question

Cov(X,Y) = covariance between x and y = -1.84

Formula for correlation coefficient

Round correlation coefficient up to 3 decimal place

Correlation coefficient = - 0.892

Answer for First part

Correct choice is ( C) choice

Correlation coefficient = - 0.892

# second question

Formula for mean that is E(x)

P(x) means column of f(x)

x	p(x)	x * p(x)
35	0.20	= 35*0.20 = 7
55	0.50	= 550.50 = 27.5*
20	0.30	=20*0.30 = 6

E(X) means sum of the calculated value from third column

Final answer for second part :-

Correct choice is (A) for second part

orchestra answered 2 years ago

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