The problem describes the expected returns of Asset A and Asset B over three years. The task is to determine the correlation between the returns of Asset A and Asset B based on the given data.

1. Problem Description

The problem describes the expected returns of Asset A and Asset B over three years. The task is to determine the correlation between the returns of Asset A and Asset B based on the given data.

2. Solution Steps

To determine the correlation between Asset A and Asset B, we observe their returns over the three years.

Year 1: Asset A = 6, Asset B = 8

Year 2: Asset A = 7, Asset B = 7

Year 3: Asset A = 8, Asset B = 6

As the return of Asset A increases from 6 to 7 to 8, the return of Asset B decreases from 8 to 7 to

6. This indicates a negative relationship. Specifically, for every 1% increase in Asset A's return, Asset B's return decreases by 1%. Therefore, the correlation is perfectly negative.

3. Final Answer

Perfectly negatively correlated.