Question

The share prices of two different stocks are given in the following table:

Stock A	234	245	278	345	378	230	210	423
Stock B	1090	1200	1345	1256	1640	1456	1347	1120

1. Find the correlation coefficient between stock A and stock B

2. Also find coefficient of variation for each stock and from that , conclude which one is more stable.

Answer 1

1)We have to find correlation coefficient for given data,

n	Quantity of Information
ΣA	Total of the First Variable Value
ΣB	Total of the Second Variable Value
ΣAB	Sum of the Product of First Value & Second Value
ΣA2	Sum of the Squares of the First Value
ΣB2	Sum of the Squares of the Second Value

	A	B	A^2	B^2	A*B
	234	1090	54756	1188100	255060
	245	1200	60025	1440000	294000
	278	1345	77284	1809025	373910
	345	1256	119025	1577536	433320
	378	1640	142884	2689600	619920
	230	1456	52900	2119936	334880
	210	1347	44100	1814409	282870
	423	1120	178929	1254400	473760
total	2343	10454	729903	13893006	3067720

2)we have to compute coefficient of variation for each data set.

	A	(A-)^2	B	(B-)^2
	234	3466.26563	1090	46980.5625
	245	2292.01563	1200	11395.5625
	278	221.265625	1345	1463.0625
	345	2717.01563	1256	2575.5625
	378	7246.26563	1640	111055.563
	230	3953.26563	1456	22275.5625
	210	6868.26563	1347	1620.0625
	423	16932.5156	1120	34875.5625
total	2343	43696.875	10454	232241.5
		292.875		1306.75
		73.9060848		170.382474

CV for A,

CV for B,

The coefficient of variation is stable, which is less than the other  coefficient of variation.

Here we compare both CV's,

  

Then is more stable.