Correlation coefficient, Applied Statistics

Consider three stocks A, B and C costing $100 each. The annual returns on the three stocks have mean $5 and variance $10.

a. Suppose that the returns on the three stocks are i.i.d.    Find the means and variance of the returns on Portfolio I, consisting of 3 units of A, and Portfolio II, consisting of 1 units each of A, B and C?

b. Suppose the returns from A and B have a correlation coefficient of -0.8 but they are uncorrelated with returns from C. Find the means and variances of the returns on the two portfolios.

c. Suppose the returns from A, B, and C are perfectly correlated (each pair have a correlation =1).  Find the means and variances of the returns on the two portfolios.  Is there any benefit to diversification in this case?

Posted Date: 3/13/2013 2:13:27 AM | Location : United States







Related Discussions:- Correlation coefficient, Assignment Help, Ask Question on Correlation coefficient, Get Answer, Expert's Help, Correlation coefficient Discussions

Write discussion on Correlation coefficient
Your posts are moderated
Related Questions
Mathematical Properties The sum of deviations of the items from the arithmetic mean (taking signs into account) is always zero, i.e.      = 0. The sum of

Prediction Inte rval We would like to construct a prediction interval around    which would contain the actual Y. If n  ≥  30,     ± Zs e  would be the interval, where Z

The tension, T, in the tow rope pulling the car in Newtons is given in P8.  Determine the minimum length of the rope l, between A and B, so that the tension in either AB or AC equa

a) What is meant by secular trend? Discuss any two methods of isolating trend values in a time series.

Multivariate analysis of variance (MANOVA) is a technique to assess group differences across multiple metric dependent variables simultaneously, based on a set of categorical (non-

how do you find if two way or one way

Collect data about the chosen business problem or opportunity at the company. Explain how you obtained a suitable sample of either qualitative or quantitative data. Review data f

introduction of median

Geometric Mean The geometric mean   of numbers is defined as the th root of the product of numbers .It is obtained by multiplying all the values of a variable and then extracti

I have 5 observations that i must plug into spss. I need an example of 1. I do not know if you are familiar with SPSS but I am going to ask anyway. Subject 1 is a Hispanic male who