What does variance measure in the context of stock returns?

The average daily return of a stock The difference between the highest and lowest daily returns How much a stock's return fluctuates compared to its average daily returns The overall profitability of a stock

What does a large variance in stock returns suggest about the riskiness of the investment?

The stock is likely to be less risky The stock is likely to be more risky The variance does not provide information about risk The stock is guaranteed to have high returns

What is the relationship between variance and standard deviation?

Variance is the square of standard deviation Standard deviation is the square of variance Variance is the square root of standard deviation Standard deviation is the square root of variance

What does covariance measure in the context of the stock market?

The total return of two stocks The average return of two stocks How the stock prices of two or more stocks move together The difference in risk between two stocks

What does a positive covariance between two stocks indicate?

The stocks are likely to move in opposite directions The stocks are not related in any way The stocks are likely to move in the same direction One stock is guaranteed to have higher returns than the other

What is the preferred covariance relationship between stocks in a well-diversified portfolio?

Positive covariance Negative covariance Zero covariance Covariance is not a relevant factor in portfolio diversification

Why do portfolio managers prefer stocks with negative covariance?

To maximize overall portfolio returns To minimize the overall risk of the portfolio To ensure all stocks in the portfolio move in the same direction To simplify portfolio management

How is covariance typically calculated and presented when a portfolio contains more than two stocks?

Using a simple average of all stock covariances Using a complex algorithm that considers all stock relationships Using a variance-covariance matrix Covariance is not calculated for portfolios with more than two stocks