Question
In: Math
1. Calculate the covariance between profits and market capitalization and what does the covariance indicate about...
1. Calculate the covariance between profits and market capitalization and what does the covariance indicate about the relationship between profits and market capitalization? (positive or negative).
|
2. Calculate the correlation coefficient between profits and market capitalization and what does this indicate about the relationship between profits and market capitalization? (strong/weak/non-linear relationship) . |
| Company | Profits ($ millions) | Market Capitalization ($ millions) |
| Alliant Techsystems | 313.20 | 1891.90 |
| Amazon.com | 631.00 | 81458.60 |
| AmerisourceBergen | 706.60 | 10087.60 |
| Avis Budget Group | -29.00 | 1175.80 |
| Boeing | 4018.00 | 55188.80 |
| Cardinal Health | 959.00 | 14115.20 |
| Cisco Systems | 6490.00 | 97376.20 |
| Coca-Cola | 8572.00 | 157130.50 |
| ConocoPhillips | 12436.00 | 95251.90 |
| Costco Wholesale | 1462.00 | 36461.20 |
| CVS Caremark | 3461.00 | 53575.70 |
| Delta Air Lines | 854.00 | 7082.10 |
| Fidelity National Financial | 369.50 | 3461.40 |
| FMC Technologies | 399.80 | 12520.30 |
| Foot Locker | 278.00 | 3547.60 |
| General Motors | 9190.00 | 32382.40 |
| Harley-Davidson | 599.10 | 8925.30 |
| HCA Holdings | 2465.00 | 9550.20 |
| Kraft Foods | 3527.00 | 65917.40 |
| Kroger | 602.00 | 13819.50 |
| Lockheed Martin | 2655.00 | 26651.10 |
| Medco Health Solutions | 1455.70 | 21865.90 |
| Owens Corning | 276.00 | 3417.80 |
| Pitney Bowes | 617.50 | 3681.20 |
| Procter & Gamble | 11797.00 | 182109.90 |
| Ralph Lauren | 567.60 | 12522.80 |
| Rockwell Automation | 697.80 | 10514.80 |
| Rockwell Collins | 634.00 | 8560.50 |
| United Stationers | 109.00 | 1381.60 |
| United Technologies | 4979.00 | 66606.50 |
| UnitedHealth Group | 5142.00 | 53469.40 |
Solutions
Expert Solution
COVARIANCE:
1. BRING DATA IN TO EXCEL SHEET
2. WRITE A FORMULA "=COVAR(ARRAY1,ARRAY2) AND GET THE COVRIANCE BETWEEN TWO VARIABLES
3. If both variables tend to deviate in the same direction (both go above their means or below their means at the same time), then the covariance will be positive
4. FIND MEAN VALUE WITH "AVERAGE" FORMULA IN EXCEL
SO BOTH TREND IN THE SCATTERPLOT CHART SHOWS POSITIVE TREND AND CLEAR POSITIVE RELATIONSHIP.
CORRELATION:
WRITE A FORMULA "=CORREL(ARRAY1,ARRAY2)" TO GET CORRELATION VALUE
CORRELATION VALUE 0.82 IS STRONG POSITIVE LINEAR RELATIONSHIP BETWEEN TWO VARIABLES
FORMULA:
milcah answered 1 year agoRelated Solutions
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What fraction of the total risk (variance) comes from the
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a. Calculate the covariance between variables X and Y. Is it a positive or negative relationship between the two variables?
Observation
x
y
1
-22
22
2
-33
49
3
2
8
4
29
-16
5
-13
10
6
21
-28
7
-13
27
8
-23
35
9
14
-5
10
3
-3
11
-37
48
12
34
-29
13
9
-18
14
-33
31
15
20
-16
16
-3
14
17
-15
18
18
12
17
19
-20
-11
20
-7
-22
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