What is the covariance and co-efficient of correlation


Stocks L and M have yielded the following returns for the past two years.

Years              Return %
                     L              M
1995             12            14
1996             18            12

(i) What is the expected return on portfolio made up of 60 percent of L and 40 percent of M? Find out the standard deviation of each stock.

(ii) What is the covariance and co-efficient of correlation between stock L and M?

(iii) What is the portfolio risk of a portfolio made up of 60 percent of land 40 percent

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Portfolio Management: What is the covariance and co-efficient of correlation
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