Answer (B) is correct . The covariance measures the volatility of returns together with their correlation with the returns of other securities. It equals the coefficient of correlation of the securities being compared times the standard deviations of the securities. The covariance of two stocks is the same regardless of which stock is compared to the other.
Answer (A) is incorrect because The covariance of Stock B with Stock A is the same as the covariance of Stock A with Stock B.
Answer (C) is incorrect because The covariance of Stock B with Stock A is the same as the covariance of Stock A with Stock B.
Answer (D) is incorrect because The covariance of Stock B with Stock A is the same as the covariance of Stock A with Stock B.
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