Correlation coefficients between all pairs of stock prices

Assignment Help Basic Statistics

Reference no: EM131809282

Question: 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.

55_Coca cola.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: EM131809282

Questions Cloud

What is the youngest age at which don can retire : He will make no provision for a retirement income after age 76. What is the youngest age at which Don can retire?

Share your metaphor and describe what could happen : Share your metaphor and describe what could happen if someone does not use critical thinking when encountering that metaphor.

What was the ceos salary for the year : For the period above, Diamonds on The Soles of Her Shoes LLC sponsored a $200,000 advertising campaign, spent $700. What was the CEO's salary for the year?

What was the future worth of ayn deposits : After receiving an inheritance of $25,000 on her 21st birthday, Ayn deposited the inheritance in a savings account with an effective annual interest rate

Correlation coefficients between all pairs of stock prices : Diversification Is considered Important in finance because it allows investors to reduce risk by investing in a variety of assets.

Discuss the various preferences afforded preferred stock : Capital stock is an important area of a corporation's equity section. Discuss the various preferences afforded preferred stock

Construction engineering technology program : The Association of General Contractors (AGC) is endowing a fund of $1 million for the Construction Engineering Technology Program at Grambling State University

Investing in an individual retirement account : A new engineer is considering investing in an individual retirement account (IRA) with a mutual fund that has an average annual return of 10%.

What is the future worth of cost of the machinery : The machinery has a salvage value of 5% of its initial cost. Interest is 10%. What is the future worth of cost of the machinery?

User Account

All Pages