Answer: 0.22

## Calculation Explanation To calculate the correlation between stocks X and Y, we use the formula: \[\rho_{X,Y} = \frac{\text{Cov}(X,Y)}{\sigma_X \cdot \sigma_Y}\] From the covariance matrix: - Variance of X (σ²_X) = 650 - Variance of Y (σ²_Y) = 450 - Covariance between X and Y = 120 **Step 1: Calculate standard deviations** \[\sigma_X = \sqrt{650} = 25.50\] \[\sigma_Y = \sqrt{450} = 21.21\] **Step 2: Calculate correlation** \[\rho_{X,Y} = \frac{120}{25.50 \times 21.21} = \frac{120}{540.855} = 0.22\] Therefore, the correlation coefficient between stocks X and Y is 0.22, which corresponds to option B.

Author: Tanishq Prabhu