Question

Appendix 1.1: Table 1.1 - Weekly discrete rate of returns
Week	Date	Apple Inc. (AAPL)	McDonald's Corporation (MCD)	Southwest Airlines Co. (LUV)	S&P 500 Index (GSPC)
1	30-Oct-17
2	6-Nov-17	1.2549%	-1.8187%	-1.1872%	-0.2141%
3	13-Nov-17	-2.2355%	0.6847%	2.2714%	-0.1336%
4	20-Nov-17	2.8316%	1.4330%	0.7893%	0.9140%
5	27-Nov-17	-2.2409%	2.2269%	8.6687%	1.5293%
6	4-Dec-17	-0.9841%	0.7554%	5.6980%	0.3512%
7	11-Dec-17	2.7198%	0.5289%	2.3625%	0.9168%
8	18-Dec-17	0.5968%	-1.5205%	1.9672%	0.2814%
9	25-Dec-17	-3.3001%	0.4109%	-0.7899%	-0.3626%
10	1-Jan-18	3.4068%	1.1225%	-1.7302%	2.6010%
11	8-Jan-18	1.1923%	-0.2775%	1.6204%	1.5708%
12	15-Jan-18	0.7741%	1.4668%	-0.4753%	0.8635%
13	22-Jan-18	-3.8916%	1.2742%	-6.5013%	2.2265%
14	29-Jan-18	-6.4234%	-5.0327%	-3.4767%	-3.8547%
15	5-Feb-18	-2.5435%	-5.0677%	-5.4626%	-5.1620%
16	12-Feb-18	10.6908%	-1.8712%	5.0018%	4.3011%
17	19-Feb-18	1.7815%	3.3355%	-0.4815%	0.5519%
18	26-Feb-18	0.4004%	-9.0662%	-0.3110%	-2.0402%
19	5-Mar-18	2.1421%	6.7192%	3.2588%	3.5418%
20	12-Mar-18	-1.0876%	3.2562%	2.2327%	-1.2402%
21	19-Mar-18	-7.3475%	-4.5455%	-6.8637%	-5.9502%
22	26-Mar-18	1.7224%	0.9033%	0.9873%	2.0326%
23	2-Apr-18	0.3530%	3.1142%	-3.4742%	-1.3783%
24	9-Apr-18	3.7739%	0.2977%	-0.3979%	1.9900%
25	16-Apr-18	-5.1591%	-1.8302%	-0.5448%	0.5210%
26	23-Apr-18	-2.0475%	-0.2960%	-2.2640%	-0.0086%
27	30-Apr-18	13.2468%	4.2514%	-1.4011%	-0.2431%
28	7-May-18	2.5939%	0.2181%	-0.6063%	2.4142%

The variance of returns for each stock and the index and the covariances of returns between each pair of stocks, the covariance between each stock and the stock market index, and the corresponding correlation coefficients. Generate covariance and correlation matrix

Answer 1

Ans) Covariance matrix

	Apple Inc. (AAPL)	McDonald's Corporation(MCD)	Southwest Airlines Co. (LUV)	S&P 500 Index (GSPC)
Apple Inc. (AAPL)	1	0.000521292	0.000508845	0.0005781
McDonald's Corporation(MCD)	0.00052129	1	0.000376826	0.00043445
Southwest Airlines Co. (LUV)	0.00050884	0.000376826	1	0.000461747
S&P 500 Index (GSPC)	0.0005781	0.00043445	0.000461747	1

Correlation matrix

	Apple Inc. (AAPL)	McDonald's Corporation(MCD)	Southwest Airlines Co. (LUV)	S&P 500 Index (GSPC)
Apple Inc. (AAPL)	1	0.358725793	0.323015812	0.542678636
McDonald's Corporation(MCD)	0.35872579	1	0.327911528	0.559057845
Southwest Airlines Co. (LUV)	0.32301581	0.327911528	1	0.548121937
S&P 500 Index (GSPC)	0.54267864	0.559057845	0.548121937	1