how to calculate covariance? pls tell.
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Covariance measures the total variation of two random variables from their expected values. ...
Obtain the data.
Calculate the mean (average) prices for each asset.
For each security, find the difference between each value and mean price.
Multiply the results obtained in the previous step.
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Covariance is calculated by analyzing at-return surprises (standard deviations from the expected return) or by multiplying the correlation between the two variables by the standard deviation of each variable.
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