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The below table shows returns of the three assets (return 1, return 2, return 3)...

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Finance

The below table shows returns of the three assets (return 1, return 2, return 3) during the three states (Bad, Normal, Good). Compute the expected returns of the three assets. In addition, find the covariance between asset 1 and asset 2 and covariance between asset 1 and 3 and calculate the two corresponding correlation coefficients.

States Probability return 1 return 2 return 3
Bad 0.3 -0.12 0.05 0.25
Normal 0.4

0.08

 0.05 0.12
Good 0.3 0.15 0.05 0.01

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