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covariance |
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Covariance A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means returns vary inversely. One method of calculating covariance is by looking at return surprises (deviations from expected return) in each scenario. Another method is to multiply correlation between the two variables by the standard deviation of each variable. Notes: If you owned one asset that had a high covariance with another asset that you didn't own, then you would receive very little increased diversification by adding the second asset. Of course, the opposite is true as well, adding assets with low covariance to your portfolio lowers overall portfolio risk.Covariance A statistical measure of the degree to which random variables move together. A positive covariance implies that one variable is above (below) its mean value when the other variable is above (below) its mean value.
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The new inputs to this procedure are the expected return for each security and the co-variances between all securities and the outcomes of contract opportunities. ORI) based on its extremely strongly capitalization and diverse group of subsidiaries with limited expected co-variance in operating results. The parent company and the holding company of all operating units, ORI is extremely strongly capitalized, has a history of very strong earnings, and benefits from a diversity of sources to pay its obligations, represented by its operating units, with little to moderate expected co-variance of operating results. |
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