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Q » Define covariance.
06 Dec, 2025
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A » Covariance is a statistical measure used in finance to assess the relationship between two asset returns. It indicates how changes in one asset's price are expected to affect another's. A positive covariance suggests that asset returns move in the same direction, while a negative covariance indicates they move inversely. Understanding covariance helps investors diversify portfolios and manage risk by evaluating how assets may interact within the market environment.
06 Dec, 2025
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