Question

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Ford GE Amazon

2016 10 - 6 2

2017 - 5 13 6

2018 14 - 5 1

2019 - 7 18 7

#1 Find the sample correlation coefficient of the return on Ford and the return on GE.

	a.	- .5739
	b.	- .6833
	c.	- .9785
	d.	none of these

#2  What is the sample correlation coefficient of the return on GE and the return on Amazon.

		.3218
		.4163
		.9849
		None of these

Answer 1

1) The correct answer is option C i.e. -.9785

2) The correct answer is option C i.e. .9849

Year	Ford	GE	Amazon	(Ford-Mean of Ford)*(GE-Mean of GE)	(GE-Mean of GE)*(Amazon-Mean of Amazon)
2016	10	-6	2	-77	22
2017	-5	13	6	-64	16
2018	14	-5	1	-110	30
2019	-7	18	7	-130	39
Mean	3	5	4			=> average of returns
Standard Deviation	10.5515	12.3018	2.9439			=> using STDEV.S formula
Total of (Ford-Mean of Ford)*(GE-Mean of GE)				-381	107
Correlation Coefficient between Ford and GE Total /[ (n-1)*standard Deviation of Ford*standard Deviation of GE]	-0.9785		=>-381/((3*10.5515*12.3018)
Correlation Coefficient between GE and Amazon Total / [(n-1)*standard Deviation of GE*standard Deviation of Amazon]		0.9849	=>107/(3*12.3017*2.9439)

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