Question

If you have a portfolio with the following returns: 2015 22% 2016 22% 2017 22% 2018...

If you have a portfolio with the following returns:

2015 22%

2016 22%

2017 22%

2018 22%

2019 22%

The standard deviation would be ________ and its correlation coefficient would be expected to be _________

Homework Answers

Answer #1

Standard deviation would be deviations of Return of stock from the mean so when there is no deviation from the mean as the average of Return would be 22% and standard deviation would be NIL, because there is no deviation from the average mean.

The correlation coefficient would be equal to 1 because the returns are completely replicating each other so it is always moving in similar direction, it can be said that when the two years return are similar and moving in same direction, it would be said to be e having a perfect positive correlation of +1.

Correct answer is-

Standard deviation= NIL

Correlation coefficient= +1

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