How do you calculate returns?

Rt=(Pt-(Pt-1)+Dt)/Pt-1

Roct=(Poct-(Psept)+0)/Psept

How do you calculate the mean return (Expected Return E[R])?

E(Ri)=1/T E Ri,t

What is the equation to calculate the dispersion around the mean?

VAR(Ri)=1/(T-1)*(return (Rt)-expected return E(Ri))^2 [Do for each returns & then times by the 1/(T-1)

How do you calculate the standard deviation (STD), also used as a dispersion measure?

STD(Ri)=Square root of the VAR(Ri)

What is Covariance?

When dealing with two random variables (two investments) we are interested in the mean, variance & whether they share any relationship.

How do you calculate covariance?

Using the COV equation

What is Correlation and how do you calculate it?

a standardised measure of covariance, it will range between +1 and -1, it is calculated using the CORREL equation

How do you calculate the variance without covariance?

Correl(A,B)=Cov(a,b)/STDa*STDb,

therefore Cov = Correl(a,b)*STDa*STDb