Beta - Covariance -Variance - Standard deviation - Correlation

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BaseballRedhawks

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Anyone else getting confused with all of them?
Im reviewing on capital market expetaitons. And it looks like Beta = Covariance / Variance of Market. This Covariance = Standard deviaiton i * Standard deviation of market * correlation.
Then Correlation between 2 assets is Beta1 * Beta 2 * Variance of market / Standard deviaiton 1 * Standard deivaiton 2.
Getting like 6 different formulas/wears ot break thingso ut mixed up..
 
Where did you get the formula for the correlation (of returns) of two assets?
I think I’ve seen it before, and I’ve always hated it.
What you wrote doesn’t work (but I think it’s not your fault).
 
cov of 2 assets = b1 * b2 * variance of market => when the market model is used.
correl = cov / (std 1 * std2) -> remains the same as before.
 
Its all from the schweser books level 3 presentation materials or books…. ill post the exact stuff tomorrow. Thanks!
 
Am i incorrectly substituitng two things together that i shoudn’t?
This is from Schweser - capital market expectations for Singer Terhaar analysis.
So in the book, the definition of correlation (relationship between the covariance and correlation:
m = market
correlaiton (i,m) = Covariance (i,m) / (Standard deviation i * Standard deviaiton M)
Then it says Covariance (i,m), which is the numerator in the above equation = Correlationi,m * Standard deviation i * stardard deviation of M.
Then Beta = Covariance (i,m) / Variance (m)
From all of these, it looks like you are just comparing 1 country, to the overall market.
Now, in my schweser class notes, under FInnancial Equilibirum approach it says:
Covariance is: Betai, *Betaj, * variance(m)
So it looks like there there are 2 countries being compared to the overall market..
 
Formula 1: Beta = Covariance (i,m) / Variance (m)
standard beta formula, market against 1 asset.
and correlation of i against market m = covariance (i,m) / [std(i) * std (m)]
Remember L 1 and 2 Regression - correlation / beta formula in your 1 variable Regression.
What you get here is the beta of the asset compared to market.
Formula 2: cov(i,j) = Betai, *Betaj, * variance(m)
2nd one is the market model (ICAPM) related -
- and here you have 2 assets in the mix.
Beta i and beta j are defined by the standard formula above.
this formula provides you with the covariance of i against j
and correlation i, j = covariance i,j / [std (i) * std (j)]
 
Thanks!
THis is bringing up bad memories of level 2. i remember a week before the exam, i started writing all these of market models and beta….. and little did i know…. it didn’t help on the exam : l
 
These are some of the worst formulas to remember for level iii. No worries, there are not that many. Just write them down and try to give them a look from time to time. I learnt them 2 weeks ago but i already forgot
 
I am also suffering from the same probelm - forgot every thing learned couple of weeks agao (sinking feeling)
 
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