Variance, Covariance and Correlation Example

# Variance, Covariance and Correlation Example - -3-3.4...

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Quantitative Methods in Finance Variance, Covariance and Correlation Example Sample A Deviations 2 -3 9 3 -2 4 5 0 0 7 2 4 8 3 9 Sums 25 0 26 Mean = 25 / 5 5 6.5 Standard Deviation (s) = Square root (6.5) 2.55 Sample B Deviations 2 -3.4 11.56 4 -1.4 1.96 6 0.6 0.36 6 0.6 0.36 9 3.6 12.96 Sums 27 0 27.2 Mean = 27 / 5 5.4 6.8 Standard deviation (s) = Square root (6.8) 2.61 Covariance Deviations Product of Sample A Sample B Deviations
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Unformatted text preview: -3-3.4 10.2-2-1.4 2.8 0.6 2 0.6 1.2 3 3.6 10.8 Sums 25 Covariance (Cov) = 25 / (5 - 1) 6.25 6.25 / (2.55) x (2.61) 0.94 Sample Data Squared Deviations Variance (s 2 ) = 26 / (5 - 1) Sample Data Squared Deviations Variance (s 2 ) = 27.2 / (5 - 1) Correlation coeffiicient (r)= Cov(A,B) / s A s B =...
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