Question

The elements in the off-diagonal positions of the variance/covariance matrix are:

security selections.

variances.

None of these.

covariances.

security weights.

Answer 1

Variance covariance matrix is a square type of matrix with the same number of rows and columns. This matrix holds variance and covariance linked with a number of variables. The diagonal elements of the matrix contain the variances of variables and the off-diagonal elements contain the covariance between all possible pairs of variables. Element in i,j position is the covariance between i-th and j-th elements of a random variable.

Hence option “Covariance” is correct answer.