Volatility (Standard Deviation) Correlation with Microsoft HP Alaska Air Southwest Airlines Ford Motor Kellogg General Mills Microsoft 33% 1.00 0.39 0.21 0.24 0.27 0.05 0.08 HP 37% 0.39 1.00 0.28 0.35 0.27 0.11 0.06 Alaska Air 37% 0.21 0.28 1.00 0.39 0.15 0.15 0.20 Southwest Ford Airlines Motor 31% 50% 0.24 0.35 0.39 1.00 0.30 0.15 0.22 0.27 0.27 0.15 0.30 1.00 0.18 0.06 Kellogg 20% 0.05 0.11 0.15 0.15 0.18 1.00 0.54 a. What is the covariance between Microsoft and HP? b. What is the covariance between General Mills and Ford? c. What is the volatility of a portfolio with equal amounts invested in Microsoft and Hewlett-Packard stock? General Mills 17% 0.08 0.06 0.20 0.22 0.06 0.54 1.00 d. What is the volatility of a portfolio with equal amounts invested in Microsoft and Alaska Air Stock?
Volatility (Standard Deviation) Correlation with Microsoft HP Alaska Air Southwest Airlines Ford Motor Kellogg General Mills Microsoft 33% 1.00 0.39 0.21 0.24 0.27 0.05 0.08 HP 37% 0.39 1.00 0.28 0.35 0.27 0.11 0.06 Alaska Air 37% 0.21 0.28 1.00 0.39 0.15 0.15 0.20 Southwest Ford Airlines Motor 31% 50% 0.24 0.35 0.39 1.00 0.30 0.15 0.22 0.27 0.27 0.15 0.30 1.00 0.18 0.06 Kellogg 20% 0.05 0.11 0.15 0.15 0.18 1.00 0.54 a. What is the covariance between Microsoft and HP? b. What is the covariance between General Mills and Ford? c. What is the volatility of a portfolio with equal amounts invested in Microsoft and Hewlett-Packard stock? General Mills 17% 0.08 0.06 0.20 0.22 0.06 0.54 1.00 d. What is the volatility of a portfolio with equal amounts invested in Microsoft and Alaska Air Stock?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Volatility (Standard Deviation)
Correlation with
Microsoft
HP
Alaska Air
Southwest Airlines
Ford Motor
Kellogg
General Mills
Microsoft
33%
1.00
0.39
0.21
0.24
0.27
0.05
0.08
HP
37%
0.39
1.00
0.28
0.35
0.27
0.11
0.06
Alaska Southwest
Air
Airlines
37%
31%
0.21
0.28
1.00
0.39
0.15
0.15
0.20
0.24
0.35
0.39
1.00
0.30
0.15
0.22
Ford
Motor Kellogg
50%
20%
0.27
0.27
0.15
0.30
1.00
0.18
0.06
0.05
0.11
0.15
0.15
0.18
1.00
0.54
a. What is the covariance between Microsoft and HP?
b. What is the covariance between General Mills and Ford?
c. What is the volatility of a portfolio with equal amounts invested in Microsoft and
Hewlett-Packard stock?
General
Mills
17%
0.08
0.06
0.20
0.22
0.06
0.54
1.00
d.
What is the volatility of a portfolio with equal amounts invested in Microsoft and Alaska
Air Stock?
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