What is the correlation coefficient between Stock X and Stock Y?

Stock X       Stock Y

16%               30%

22%                21%

11%                22%



To calculate the correlation coefficient (denoted by \( r \)) between Stock X and Stock Y, we use the formula:

\[
r = \frac{n\sum{XY} - \sum{X}\sum{Y}}{\sqrt{(n\sum{X^2} - (\sum{X})^2)(n\sum{Y^2} - (\sum{Y})^2)}}
\]

Where:
- \( X \) and \( Y \) are the individual data points for Stock X and Stock Y, respectively.
- \( n \) is the number of data points.

Let’s break it down step by step for the given data points:

### Data:
- Stock X: 16%, 22%, 11%
- Stock Y: 30%, 21%, 22%

I’ll calculate the correlation coefficient for you.The correlation coefficient between Stock X and Stock Y is approximately \(-0.153\). This indicates a weak, negative relationship between the two stocks' returns.

Would you like more details or have any questions?

Here are some related questions you might find interesting:
1. How does a negative correlation affect investment strategies?
2. What other measures can assess the relationship between two stocks?
3. How does the correlation coefficient range from -1 to 1 affect interpretation?
4. What are the implications of a weak correlation like this one?
5. How can we calculate covariance between Stock X and Stock Y?

**Tip:** A correlation coefficient closer to 0 suggests little to no linear relationship between two variables.

What is the correlation coefficient between Stock X and Stock Y?

Learn how to calculate the correlation coefficient between Stock X and Stock Y with detailed steps. Using the Pearson correlation formula, this problem involves basic statistics and linear relationships. Data points: Stock X (16%, 22%, 11%) and Stock Y (30%, 21%, 22%). Suitable for students in Grades 10-12.

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