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CFA Level 1
Quantitative Methods

Correlation and Covariance of Asset Returns

Easy Statistical Concepts And Returns Correlation And Covariance

Consider two assets, Asset X and Asset Y, whose returns over a specific period are being analyzed for their relationship. The correlation coefficient between the returns of Asset X and Asset Y is found to be +0.70. This implies a strong positive correlation between the returns of the two assets.

What can be said about the covariance of the returns of these two assets?

Hint

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