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Covariance is a measure of the degree of the degree to which two assets move together relative to their individual mean values over time
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Covariance No consideration was given to the risk of an individual stock, what mattered was its covariance with other stocks and therefore its impact on the portfolio as a whole. Covariance is a measure of the degree of the degree to which two assets move together relative to their individual mean values over time. A positive covariance means that the rates of return for two investments tend to move at the same direction according to their individual means during the same time period. While a negative covariance indicates that the rates of return of two assets tend to move in different directions relative to their means at a certain time period. Covariance is affected by the variability of the two individual return series. Correlation Coefficient - Diversification Companies, by pooling their money enable future investors to hold fractional shares of many different securities. In fact, the exact definition of...
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