Calculate daily and annualised return and standard deviation

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Reference no: EM133616099

Problem: You are to assess a 2-asset portfolio that consists of Westpac shares and Fortescue shares. You have been given the historical prices of these companies over the past 2 years (this spreadsheet Download this spreadsheet) in order to analyse historical performance. Assume that the risk-free rate is 3.5% per year and the forward-looking market return is expected to be 8.5% per year. Forecast adjustments: You note that the data you have used does not include dividend information, which you also want to include in your analysis. For Westpac, the annual dividend rate is 7.42%, and for Fortescue the annual dividend rate is 0.83% You also note that Westpac has suffered from a large one-off event in the recent past (compliance breaches) and, thus, in your return expectations you will adjust the historical return upwards by 1.5% p.a. Fortescue, on the other hand, has had relative good luck recently and, thus, in your return expectations you will adjust the historical return downwards by 1.5% p.a. Based on the daily closing prices, calculate the daily and annualised returns and standard deviations, as well as the correlations of these two stocks.

Reference no: EM133616099

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