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Basic Question 10 of 23
If the covariance of Stock A with Stock B is -100, what is the covariance of Stock B with Stock A?
B. -100
C. 1/100
A. +100
B. -100
C. 1/100
User Contributed Comments 4
| User | Comment |
|---|---|
| Bibhu | By definition, covariance is the variance of A and B together. So if covariance of A to B is -100, so would be from B to A i.e. -100. |
| aniketcpp | can covariance be negative? A negative covariance means returns move inversely. When one variable's value goes up, the other's tends to go down |
| jonan203 | don't confuse covariance with correlation. |
| Rachelle3 | think of covariance as a box if you see it like this you will get it: {box 1 by box 1}. think of microsoft excel spreadsheets or the old fashioned multiplication we had to use in learning multiplication at school |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data
calculate and interpret portfolio standard deviation
describe the effect on a portfolio's risk of investing in assets that are less than perfectly correlated
CFA® 2024 Level I Curriculum, Volume 2, Module 1.