Problem:
Below is recent monthly stock return data for Exxon Mobil (XOM) and Microsoft (MSFT). Using a spreadsheet and its functions, compute the average, variance, standard deviation, and correlation between the returns for these stocks. What does the correlation between the returns imply for a portfolio containing both stocks?
MONTH XOM RETURN MSFT RETURN
November -4.6% 10.4%
October 0.1% 13.6%
September -1.9% -10.3%
August -3.3% -13.8%
July -4.4% - 9.3%
June -1.6% 5.5%
May 0.7% 2.1%
April 9.4% 23.9%
March -0.1% -7.3%
February -3.2% -3.4%