A correct option is option (c), i.e. zero
What is the covariance?
The covariance statistic gauges how closely two variables are related to one another. A positive covariance indicates a tendency for both variables to be high or low simultaneously. When there is a negative covariance, one variable tends to be high while the other tends to be low.
Why is covariance important?
Covariance can be utilized to increase diversification in an asset portfolio. A portfolio's overall risk can be quickly decreased by including assets with a negative covariance. Covariance offers a statistical gauge of the risk associated with a variety of assets.
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