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Sample Covariance

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Sample Covariance

Just as Sample Mean for the estimation of returns, the method of using sample data’s covariance within the estimation window for estimation is called sample covariance.

Math Form

\(\Sigma = (\Sigma_{ij})\)

\(\Sigma_{ij} = \frac{1}{m-1} \sum_{k=1}^m(r_{ik}-r_i)(r_{jk}-r_j) \)

 

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