Answer: -0.6

## Explanation Kendall's tau (τ) is a measure of rank correlation that assesses the strength and direction of the relationship between two variables. The formula for Kendall's tau is: $$\tau = \frac{(n_c - n_d)}{\frac{n(n - 1)}{2}}$$ Where: - $n_c$ = number of concordant pairs - $n_d$ = number of discordant pairs - $n$ = number of observations **Given data:** - Time period: 2012 to 2016 (5 years) - Number of observations (n) = 5 - Concordant pairs (n_c) = 2 - Discordant pairs (n_d) = 8 **Calculation:** First, calculate the total number of possible pairs: $$\frac{n(n-1)}{2} = \frac{5 \times 4}{2} = 10$$ Now apply the Kendall's tau formula: $$\tau = \frac{(2 - 8)}{10} = \frac{-6}{10} = -0.6$$ **Interpretation:** - A τ value of -0.6 indicates a moderately strong negative correlation - This means that when one asset's rank increases, the other asset's rank tends to decrease - The negative sign indicates an inverse relationship between the two assets Therefore, the closest value to the Kendall τ is **-0.6**.

Author: Tanishq Prabhu