16.1 - Covariance
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Practice Questions
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What does a positive covariance indicate?
💡 Hint: Think about how two related variables might behave.
What is the formula for covariance?
💡 Hint: Recall the relationship with mean values.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the range of covariance values?
💡 Hint: Consider if a value could fall below zero.
True or false: Correlation measures the strength and direction of a linear relationship.
💡 Hint: Remember the role of correlation in analysis.
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Challenge Problems
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Given the datasets A = {3, 6, 9} and B = {3, 3, 6}, calculate the covariance and correlation, explaining the contextual relationship evident in the value.
💡 Hint: Work step by step from finding means to calculating covariance.
Critically evaluate the usage of covariance in evaluating risk in financial portfolios. How does it aid in investment decisions?
💡 Hint: Use real financial examples to illustrate your interpretation.
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