Covariance Calculation

[SirViper]

Simple question on covariance. But if you’re calculating the covariance on the returns of two stocks, do you use decimal form or percentage form?
Some of the answers I’m seeing from Schweser use % numbers.
Example:
An analyst gathered the following data for Stock A and Stock B:
Time Period Stock A Returns Stock B Returns
1 10% 15%
2 6% 9%
3 8% 12%
What is the covariance for this portfolio?
A) 2.
B) 3.
C) 12.
D) 6.
———————
Using decimals the calculator will give you sample deviations of .02 and .03 and a r=1. Using percentages you get sample deviations of 2 and 3, and a r =1.
So one way gives you the covariance as 0.0006 and the other as 6
I’ve always used decimals to calculate these.

 

[soxboys21]

If you use percentages, it gives you a higher number. If you use decimal, it gives you a lower number.
Just remember to move the decimal point 4 places and you can convert back and forth between the two to get the right answer.

 

[a7m002]

Im trying to calc stand deviation in my calc but when I enter a negative number it gives me an error? Does anyone know why

 

[tvPM]

what calc? how are you entering it?

 

[neerajkanchan]

u need to use your stat functions where X is one portfolio values and Y are other portfolios values.

 

[a7m002]

Actually I just got it to work, i must have entered somethin in incorrectly, hopefully that wont happen on test, thanks for your help though