All, I know how to use the DATA/STAT to calculate sigma and correlation for a set of returns. My question is, when calculating historical vs. expectational, there’s a minor difference in the denominator (n-1 vs. n). If you’re using historical data, is there a way to compensate for the denominator or in this case we just have to calculate long-hand?!?!?

I am having trouble trying to compute correlation on my calc. Could you do it with the example below? Can you do if you are given probability too?

Here’s how you enter info on the TI BAII, click 2nd then DATA (over the 7). Then click 2nd and CE/C (CLR WORK). Now, X01 shows up, enter your first data point (return for yr. 1 for example). Hit enter and then the down arrow twice. Now, X02 shows up, enter your second data point (return for yr. 2). Do that until you have completed all the years. Now, hit 2nd then STAT (over the 8). Then use the down arrow to scroll through the results… To get correlation, you have to input data in Y01, Y02, etc. When you hit 2nd then STAT, hit the down arrow 10 times to “r”…

Do you think they would have us actually calculate the correlation from scratch? I hope they would give us the covariance and standard deviations of both assets. Or they will probably try to throw some of us off by giving the variances instead of standard deviations thinking some people will forget to convert.

You never know! I believe in one of the exams (Book 6), you had to calculate from scratch–but I’d have to go back and check!