Co-relation, statistics, Basic Statistics

Co-relation:
Co-relation in this case studies the behavior how each of the investment opportunity would react to any event vis – a vis each other. The same is measured in terms of co-relation coefficient. This gives the opportunity to the investor to diversify the investment and thus mitigate the risk.
Diversification is most effective when the correlation between the investments is –1 and it is least effective when the correlation is +1. As a result, if you want to reduce the risk of your portfolio as much as possible, you need to look for pairs of investments that have a correlation close to –1. A positive correlation means that two markets will move in tandem with each other. An up-move in one market will occur with an up-move in another market.
In our case correlation is 0.62 which is positive correlation indicating same direction for both markets. Thus investment in both markets will not help in reducing overall risk of portfolio.

Thus considering mean, standard deviation and correlation coefficient of both the markets it is advisable to invest in S&P market since it has positive rate of return with lower standard deviation. Further positive correlation coefficient does not suggest that diversification will result in reduction of risk.
Posted Date: 2/7/2012 2:12:52 AM | Location : United States







Related Discussions:- Co-relation, statistics, Assignment Help, Ask Question on Co-relation, statistics, Get Answer, Expert's Help, Co-relation, statistics Discussions

Write discussion on Co-relation, statistics
Your posts are moderated
Related Questions
Report on the residual plots – are the assumptions of the regression met

they gave me n=30 and p=.23 to get the answers for P(20,x,23)= and P(x.23)=

In the 2009 Season, the Toronto Blue Jays finished the season with a record of 75-87. In 47 of those games, both the offense and defense performed adequately, and in 42 of them, ne

Mention the characteristics of Statistics. Explain any two applications of Statistics

How do you prepare the budget balance sheet?

Interpretation or Analysis of Financial Statements. Financial report research (or financial analysis) the procedure of comprehension the possibility and earnings of an organizat


The Foschini Group has just issued a batch of preference shares that will pay a constant dividend of R8, beginning 6 years from now. If the required rate of return is 8%, what does

what is historigram in statistics please give the problems and there solution in statistics as soon as possible