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What does the correlation matrix tell us about a portfolio of stocks?

The average return of the stocks

The risk-free rate of the portfolio

The correlation between any two stocks in the portfolio

The total value of the portfolio

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What is the correlation between a stock and itself?




It depends on the stock

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Where in the correlation matrix can you find the correlation of a stock with itself?

Along the diagonals

In the first row

In the last column

Randomly distributed throughout the matrix

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What is the relationship between the correlation of Stock A with Stock B and the correlation of Stock B with Stock A?

They are always opposites

They are always the same

They are unrelated

They are sometimes the same, sometimes different

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What is the first step in calculating portfolio variance?

Calculating the standard deviation of each stock

Assigning weights to each stock in the portfolio

Calculating the covariance between each pair of stocks

Determining the risk-free rate