Reference no: EM132753388
Question: You want to form a portfolio between two stocks: Canadian Tire and the Apple Inc. Download the monthly price data from Yahoo! Finance pages for Canadian Tire (ticker symbol: CTCA.TO) and Apple (ticker symbol: AAPL) from November 1, 2015 to November 1, 2020. Calculate the monthly holding period returns for each stock in Excel using the split-adjusted prices that Yahoo provides1 . Use these data and Excel to answer the following questions:
1. What are the average monthly return and standard deviation of returns for Canadian Tire? What are the average monthly return and standard deviation of returns for the Apple? Does risk-return relationship (trade-off) hold between these two stocks?
2. Using these values, calculate the portfolio return and standard deviation for various weights in Canadian Tire and Apple:
a. Calculate the portfolio return and standard deviation for weights with alternately 0%, 5%, 10%, 15%,...., 95%, 100% weight in Apple and the rest in Canadian Tire.
b. Graph this portfolio return and standard deviation for all possible portfolios on a graph with "Return" on the vertical axis and "Standard deviation" on the horizontal axis. (hint: Use Scatter Plot type of graph)
c. Calculate the Canadian Tire's weight in the portfolio that gives the minimum standard deviation: show this portfolio on a graph built above.
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