Answer-first summary for fast verification
Answer: 0.5477
The correlation coefficient is calculated using the formula: Corr(R_A, R_B) = Cov(R_A, R_B) / (σ_A * σ_B) Where: - Cov(R_A, R_B) = 0.315 - σ_A = √(Variance of Portfolio A) = √0.525 ≈ 0.7246 - σ_B = √(Variance of Portfolio B) = √0.63 ≈ 0.7937 Calculation: Corr(R_A, R_B) = 0.315 / (0.7246 * 0.7937) = 0.315 / 0.5751 ≈ 0.5477 Therefore, the correlation between the two portfolios is 0.5477.
Author: Nikitesh Somanthe
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What is the correlation of returns between these two portfolios?
A
0.8257
B
0.0011
C
0.5477
D
0.9524
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