The V olatility of a T w o-S t o c k P o r t f olio

The V olatility of a T w o-S t o c k P o r t f olio

Using the data in the following table, estimate (a) the average return and volatility for each stock, (b) the covariance between the stocks, and (c) the correlation between these two stocks.

Year	2007	2008	2009	2010	2011	2012
Stock A	– 10%	20%	5%	– 5%	2%	9%
Stock B	21%	7%	30%	– 3%	– 8%	25%

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