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Getting correlation from regression slope (Completely stumped)
Using the following equations from the book a stab at the correlation can be made.   Calculating the residual volatilities from equation 2.4 The correlation of stock A with stock B is 0.378 and stock B has the higher residual volatility. However, the correlation is given as a "simple model", which may suggest that it is an approximation.  If I have applied it correctly, some testing shows that it is only approximate. Also of interest