How do we use correlation and covariance to manage the tradeoff between risk and return? Provide an example.© BrainMass Inc. brainmass.com June 4, 2020, 12:27 am ad1c9bdddf
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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Response explains Correlation and Covariance for manage risk and return.