# Correlation and Covariance for manage risk and return.

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How do we use correlation and covariance to manage the tradeoff between risk and return? Provide an example.

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Response explains Correlation and Covariance for manage risk and return.

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How do we use correlation and covariance to manage the tradeoff between risk and return? Provide an example.

A correlation is a single number that describes the degree of relationship between two variables. Range of correlation is from -1 to 1. For example there is a negative correlation between price and demand and there is a positive correlation between price and supply.

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