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Homework answers / question archive / Another stock, stock B, is traded in the market and has the following behavior
Another stock, stock B, is traded in the market and has the following behavior. If stock A goes up by 80% (which occurs with probability 0.5) then stock B goes down by 80%, and if stock A goes down by 20% (which occurs with probability 0.5), then stock B goes up by 20%. d. [2 points] If you take $1 and split it equally into the two stocks (i.e., 50 cents in each), what is the expected value of the portfolio value in $'s after one day? Answer: e. [2 point] What is the correlation coefficient between stocks A and BY Note: no need for a rigorous derivation and calculations just state the answer and explain your reasoning. Answer: