Reading 11- LOS A (Part 2): Q6 between, actually, requested, determine, class

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6.Thomas Manx is attempting to determine the correlation between the number of times a stock quote is requested on his firm’s website and the number of trades his firm actually processes. He has examined samples from several days trading and quotes and has determined that the covariance between these two variables is 88.6, the standard deviation of the number of quotes is 18, and the standard deviation of the number of trades processed is 14. Based on Manx’s sample, what is the correlation between the number of quotes requested and the number of trades processed?

A)   0.35.

B)   0.78.

C)   0.18.

D)   0.98.

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The correct answer was A)

Correlation = Cov (X,Y) / (Std. Dev. X)(Std. Dev. Y)
Correlation = 88.6 / (18)(14) =0.35