# Calculating the covariance between the returns of two stocks

Portfolios with more than one asset: Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 11.75 percent and 18 percent, respectively.

Probability Return A Return B

Good 0.35 0.3 0.5

Ok 0.5 0.1 0.1

Poor 0.15 -0.25 -0.3

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#### Solution Preview

Please refer attached file for better clarity of tables and missing formulas.

Probability Return(A) Deviation (A) Return(B) Deviation (B) ...

#### Solution Summary

Solution describes the steps to calculate the covariance between the returns of two given stocks.