Calculate the correlation coefficient for the portfolio using the following information:   Variance of Stock X 0.08 Variance of Stock Y 0.06   Covariance is 0.05   a. 0.1042   b. 0.7217   c. 0.00024     d. 0.0693

Q: Suppose Stock A has an expected return of 18% and a variance of 0.17, while Stock B has an expected…

A: Expected return of a portfolio is calculated as the sum of their weighted returns. It can be…

Q: Consider the following returns. The variance on a portfolio that is made up of 56% Stock X and 44%…

A: Portfolio variance refers to the total deviation of portfolio returns from the average returns of…

Q: 3. Consider two stocks A and B with expected returns of 6% (stock A) and 8% (stock B). The matrix of…

A: "Hi, Thanks for the Question. Since you asked multiple sub part question, we will answer first three…

Q: A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance…

A: Weight of stock A (WX) = 0.50 Weight of stock B (WY) = 0.50 Covariance between stock X and stock Y…

Q: The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20%…

A: a) Expected Rates of return = Sum of (Probability * Return) b) Standard Deviation = square root of…

Q: QUESTION 1 Which of the following statements is true regarding the variance or standard deviation of…

A: The degree of correlation between between various security is will be deciding the level of standard…

Q: What is the total risk of portfolio as per Sharpe's Single Index Model if standard deviation of…

A: Total Risk = Systematic Risk + Unsystematic risk Systematic Risk = Beta 2 * SD of Market2 = (1.27)2…

Q: What are the (a) expected return, (b) standard deviation, and (c) coefficient of variation for an…

A: Calculation of expected return, standard deviation and coefficient of variation: Excel workings:

Q: What is the standard deviation of the following portfolio if the coefficient of the correlation…

A: Given Information:Variance A is 10% Weight of portfolio A is 0.30 Variance B is 20% Weight of…

Q: You have a portfolio of 4 stocks with equal shares invested in each stock. Variancesof individual…

A: a) A portfolio of 4 equally weighted stocks with variance being 16 and correlation between each pair…

Q: Please provide step by step explaination (no excel) q5-

A: Introduction Variance of portfolio The degree of dispersion of a portfolio's returns is measured by…

Q: Suppose that Jerry Tan has surplus funds to invest in both stocks, Alpha and Beta. He has decided to…

A: For Stock: Expected return E(r) = ∑p*r Standard deviation = √∑p*(r-E(r))2  For portfolio: Expected…

Q: stock has a beta of 2.0. The correlation of the stock’s returns with the market is 0.5 and the…

A: The provided information are: Beta coefficient = 2.0 Correlation coefficient = 0.5  Variance of the…

Q: Calculate the correlation coefficient for the portfolio using the following information: Variance of…

A: The correlation coefficient is the measurement of the relationship between two variables and the…

Q: subject : Investment Fundamentals - Calculate Variance and Standard Deviation of those 3 stocks…

A: Standard deviation: It is the risk associated with the deviation of stock from its index.

Q: You are given the following information about 4 stocks: Variance-Covariance Matrix 3 0.0325 0.0125…

A: Weight in stock 1 (w1) = 0.25 Weight in stock 2 (w2) = 0.25 Weight in stock 3 (w3) = 0.25 Weight in…

Q: The covariance of Security X's returns and Security Y's returns is 10, and the variance of Security…

A: Correlation = Cov(x,y)/(SDx*SDy) SD is standard deviation i.e. square root of variance.

Q: A stock’s returns have the following distribution:   Calculate the stock’s expected return,…

A: Given:

Q: Calculate the expected return, variance, and standard deviation for a portfolio of four equally…

A: The expected return of the portfolio is the return that an investor gets based on the weightage…

Q: assume that the following data available for the portfolio, calculate the expected return, variance…

A: Given: Expected return of A =12.5% Expected return of B = 18.5% Standard deviation of A = 15%…

Q: Stock A has a return variance (that is σ2) of 0.02. The market portfolio has a return variance of…

A: given, σA2=0.02σM2=0.03cov =  0.01ra=0.09rm=0.12wa=0.65wm=0.35

Q: Suppose you create a portfolio with two securities: Security Security Weight (%) Security…

A: Portfolio means a bunch of assets or investments. To maximize the profits, investors invest their…

Q: Consider two risky assets that have returns variances of 0.0625 and 0.0324, respectively. The…

A: The provided information are: Return variancesσ12  and σ22 are 0.0625 and 0.0324. Two are equal…

Q: If two stocks have variance σ2=16 each, could their covariance be equal to σ12 = 20

A: It has been provided that the value of variance for two stocks is 16 . Thus, the standard deviation…

Q: The market and Stock J have the following probability distributions:  ProbabIlity         rM rJ…

A: Return and risk are the two main components of the investment. Return means earning an additional…

Q: the variance of stock A is .004, the variance of the market .007 and the covariance between the two…

A: Given that the variance of stock A is 0.004, and variance of the market is 0.007. First we need to…

Q: Given the following information on a portfolio of Stock X and Stock Y, what is the portfolio…

A: Given Variance on X = 0.0036 Variance on Y = 0.0144 Portfolio weight on X = 50% Portfolio weight on…

Q: Under which of the following scenarios, the minimum variance portfolio that contains two stocks has…

A: Assuming weight of the first stock and the second stock in the portfolio as (W) and (1 - W) Standard…

Q: An asset has a beta of 0.9, The variance of returns on a market index, cr#, is 90. If the variance…

A: Risk simply means uncertainty related to the future. The future is unpredictable so there is a high…

Q: If a stock portfolio is well-diversified, then the portfolio variance   Group of answer choices…

A: A well Diversified portfolio is an balanced portfolio that includes a verity of securities. As the…

Q: average monthly returnn, its return variance, standard deviation and betas

A: Average Monthly Returns: Average monthly returns are the amount which a firm expects to return from…

Q: What is the standard deviation of this portfolio?

A: Information Provided: Correlation = -0.10 Standard Deviation of Stock A = 3.0 Standard Deviation of…

Q: Following is information for the required returns and standard deviations of returns for A, B, and…

A: The measurement of the risk of portfolio refers to Portfolio Variance. With the help of portfolio…

Q: Consider two stocks, Stock D, with an expected return of 13 percent and a standard deviation of 28…

A: Standard deviation of stock D (S1) = 28% Standard deviation of stock I (S2) = 38% Correlation (c) =…

Q: If the variance of the portfolio is 324, Coefficient of determination of the portfolio with market…

A: Systematic risk of a portfolio refers to the risk that affects entire market and not an individual…

Q: If two stocks have variance σ^2=16 each, could their covariance be equal to σ12 = 20

A: It has been provided that the value of variance for two stocks is 16 . Thus, the standard deviation…

Q: Given a portfolio of five stocks, how many unique covariance variances, are required to calculate…

A: Covariance shows the relationship of one asset class with the other asset class in a portfolio. If…

Q: The standard deviation of a stock’s return is a measure of its?   Multiple Choice   systematic…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Consider two stocks, Stock D, with an expected return of 13 percent and a standard deviation of 30…

A:

Q: Estimate the mean and variance of this portfolio, as well as its standard deviation.

A: Mean return of the portfolio = Weight of Mercedes * Mean return of Mercedes + Weight of BMW * Mean…

Q: Assume that the following data available for the portfolio, calculate the expected return, variance…

A: Portfolio Expected Return = (wa ×Ra) + (wb ×Rb) Wa= weight of security a Wb= weight of security b Ra…

Q: The following are estimates for a stock A. Stock Expected ret. beta firm-specific variance, or…

A: A type of unavoidable risk that occurs from the political, economic, and financial factors is term…

Q: If beta of Stock A with market is 0.72 and and the market variance is 225 , the covariance between A…

A: Beta of stock A = 0.72 Market Variance = 225  Covariance between A and B = 202.5

Q: Calculate the expected return and standard deviation for S and T. (i) Calculate the covariance and…

A: Hai there, thank you for the question. As per company guidelines expert can answer only one question…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.