So i have this question and I wanted to be sure that my calculations were correct.
The standard deviations of the market returns is $0.2(20%)$ and the covariance between the return on the market portfolio and Amazon is $0.05$. Calculate the beta of Amazon.
So i know that Beta= (covariance)/ variance, where
- Covariance=Measure of a stock’s return relative to that of the market,
- Variance=Measure of how the market moves relative to its mean.
Then am I correct by squaring the Standard deviation of the market returns ($0.2$ times $0.2$) to get $0.04$ as the variance and then the Beta would be $0.05/0.04$?
Is my answer right?