Compute the correlation coefficients

Assignment Help Basic Statistics

Reference no: EM131798876

Diversification Is considered Important in finance because it allows investors to reduce risk by investing in a variety of assets. It is especially effective when the correlation between the assets is low. Consider the accompanying table, which shows a portion of monthly data on closing stock prices of four companies in 2010. The entire data can be found on the text website, labeled 2010 Stock Returns.

1121_correlation between the assets.png

a. Compute the correlation coefficients between all pairs of stock prices.

b. Suppose an investor already has a stake in Microsoft and would like to add another asset to her portfolio. Which of the remaining three assets will give her the maximum benefit of diversification?

c. Suppose an investor does not own any of the above four stocks. Pick two stocks so that she gets the maximum benefit of diversification.

Reference no: EM131798876

Questions Cloud

Interpret the covariance and the correlation coefficient : a. Calculate and interpret the covariance and the correlation coefficient.

What are the total costs for the year : Suppose NSI incurs fixed costs of $915,000 during a year in which total production is 215,000 units. What are the total costs for the year?

Prepare journal entries to record warranty claims : Prepare journal entries to record warranty claims during the period and end-of period adjustments to Warranty Provision account

Determine heathers federal income taxes due or payable : Determine Heather's federal income taxes due or payable, corporate bonds she received as gifts from her father over the last several years

Compute the correlation coefficients : a. Compute the correlation coefficients between all pairs of stock prices.

Population correlation between the size of a house : Specify the competing hypotheses in order to determine whether the population correlation between the size of a house and property taxes differs from zero.

Compute the product margins for the xactive products : Compute the product margins for the Xactive and the Pathbreaker products under the company's traditional costing system

Discuss ethical decision making : Barbara Young had great expectations about her future as she sat in her graduation ceremony

Correlation coefficient between age and happiness : a. Calculate and interpret the sample correlation coefficient between age and happiness. b. Is the population correlation c o efficient statistically

User Account

All Pages