The bellow descriptive statistics took from XYZ. Inc. and ABC.Inc. it is a stock
ID: 2775837 • Letter: T
Question
The bellow descriptive statistics took from XYZ. Inc. and ABC.Inc. it is a stock market index used as proxy for the market portfolio, in the sense of the CAPM.
a. Calculate the correlation coefficient between the two securities.
b. Calculate the beta of XYZ.Inc
Variance of ABC.Inc
0.002283
Variance of XYZ
0.033859
Standard deviation of ABC.Inc
0.047781
Standard deviation of XYZ
0.184008
Covariance
0.002643
Variance of ABC.Inc
0.002283
Variance of XYZ
0.033859
Standard deviation of ABC.Inc
0.047781
Standard deviation of XYZ
0.184008
Covariance
0.002643
Explanation / Answer
Computation of correlation coefficient between two securities
Correlation coefficient = 0.002643 (0.047781*0.184008) / 0.002283 * 0.033859
=0.300613.
Computation of beta of XYZ . Inc
beta = covariance of market return / variance of market return
= 0.002643 / 0.033859
= 0.078059.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.