Calculate the correlation coefficient and portfolio return

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Reference no: EM132068771

1. Choose two stocks (in two different sectors) from Yahoo Finance (*these two companies should have been on the market for more than 3 years, and should also pay dividends historically). Download Monthly

Historical Price (Adjusted Close Price) from Jan 1st 2015 to Jan 1st 2018. Calculate Monthly Average Return (Arithmetic Mean), Monthly Compounded Return (Geometric Mean of Return), and Risk (Standard Deviation of Historical Monthly Return).

2. Construct an investment portfolio through allocating different weights to the two stocks you picked up. Calculate the covariance, correlation coefficient and portfolio return and risk, based on the original weights you assign. Change the weight from 0 to 100%, and calculate the corresponding return and risk of your portfolio. Plot the return and risk on the ‘mean-variance’ analysis diagram, and illustrate the investment possibility curve. On the Investment Possibility Curve, highlight the minimum variance portfolio and Markowitz efficient frontier (highest return for given level of risk, or smallest risk for given level of return). Calculate the weight, return and risk for the minimum variance portfolio.

Reference no: EM132068771

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