The correlation coefficient is calculated using the formula:

ρ(X,Y) = Cov(X,Y) / (σ(X) * σ(Y))

Where:

• Cov(X,Y) = 120 (from the covariance matrix)
• σ(X) = √650 = 25.50 (standard deviation of X, which is the square root of variance of X)
• σ(Y) = √450 = 21.21 (standard deviation of Y, which is the square root of variance of Y)

Calculation: ρ(X,Y) = 120 / (25.50 * 21.21) = 120 / 540.855 = 0.2218 ≈ 0.22

Therefore, the correlation between stocks X and Y is 0.22.