Question

Do bonds reduce the overall risk of an investment portfolio? Let x be a random variable representing annual percent return for the Vanguard Total Stock Index (all Stocks). Let y be a random variable representing annual return for the Vanguard Balanced Index (60% stock and 40% bond). For the past several years, assume the following data. Compute .
x: 14 0 36 23 33 25 26 14 14 23
y: 6 5 26 17 24 17 17 5 6 6


4607

4803

5332

4243

4940

Answer 1

4343

Answer 2

x:
15
0
38
25
31
27
28
15
15
25
y:
8
2
29
18
26
16
18
2
3
8