Practice Exam 1 Question 6- Descriptive Statistics Fundamentals

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In Practice Exam1 -

Question 6

Calculate the covariance and correlation between the rental prices of
same-size houses in California and Nevada, using the “California vs
Nevada” spreadsheet. The two measures are closest to ?

Could you please explain this answer further, in a more comprehensive and explicit manner?

Thanks,
Vashist

Answer 1

Hello Vashist!

Thanks for reaching out!

This is a calculation exercise. Here, we need to determine the covariance/correlation between two price series. Simple as that. Both terms are used to describe how two variables relate to each other.

To speed up the calculation of the measures we use the Excel functions (CORREL and COV.S).

Alternatively, you can also use formulas and do it manually.

Hope this helps!

Please let me know if you need any further clarifications.

Best,
The 365 Team

Practice Exam 1 Question 6- Descriptive Statistics Fundamentals

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