Co-relation, statistics, Basic Statistics

Assignment Help:
Co-relation:
Co-relation in this case studies the behavior how each of the investment opportunity would react to any event vis – a vis each other. The same is measured in terms of co-relation coefficient. This gives the opportunity to the investor to diversify the investment and thus mitigate the risk.
Diversification is most effective when the correlation between the investments is –1 and it is least effective when the correlation is +1. As a result, if you want to reduce the risk of your portfolio as much as possible, you need to look for pairs of investments that have a correlation close to –1. A positive correlation means that two markets will move in tandem with each other. An up-move in one market will occur with an up-move in another market.
In our case correlation is 0.62 which is positive correlation indicating same direction for both markets. Thus investment in both markets will not help in reducing overall risk of portfolio.

Thus considering mean, standard deviation and correlation coefficient of both the markets it is advisable to invest in S&P market since it has positive rate of return with lower standard deviation. Further positive correlation coefficient does not suggest that diversification will result in reduction of risk.

Related Discussions:- Co-relation, statistics

What is the margin of error, The National Quality Research Center at the Un...

The National Quality Research Center at the University of Michigan provides a quarterly measure of consumer opinions about products and services (The Wall Street Journal, February

Tally, what is meant by tally

what is meant by tally

Financial limitations and expertise, Expertsmind.com offering Limitations ...

Expertsmind.com offering Limitations and expertise in financial accounting In Financial sales it is also useful in the following respects:- (1) Increased volume of finan

Explain Book value, Explain Book value The net quantity at which an advant...

Explain Book value The net quantity at which an advantage or asset group appears on the books of account, as distinguished from its marketplace or intrinsic value where book value

How to calculate midrange in statistics?, Midrange The midrange is the ...

Midrange The midrange is the measure of the center that is the value midway between the highest and the lowest values in the original data set. It is found by adding the highes

State the model and apply t-test, Studies have linked brain size in infants...

Studies have linked brain size in infants and toddlers to a number of future ailments, including autism. One study looked at the brain sizes of 30 autistic boys and 12 nonautistic

Ex. 3-12, EXERCISE 3-12 Computing Predetermined Overhead Rates and Job Cos...

EXERCISE 3-12 Computing Predetermined Overhead Rates and Job Costs [LO1,LO2, LO3, LO7] Kody Corporation uses a job-order costing system with a plantwide overhead rate based on ma

Midterm & final exams , Can you all help with midterms and final exams? mea...

Can you all help with midterms and final exams? meaning getting the assignment done within a couple hours?

Rebate, Refund can be defined as return of a part of a purchase price by a ...

Refund can be defined as return of a part of a purchase price by a seller to a buyer, usually on a purchase of a specified quantity or a value of goods within a specified period.

Adjusting entries, The notes receivable were accepted from several customer...

The notes receivable were accepted from several customers. The notes were issued on Sept. 1,2011 and will be settled together with a 20% interest on May 31, 2011.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd