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

financial performance using ratios, Write a report to an investor comparin...

Write a report to an investor comparing the performance by using the financial statements between two different companies

The owner of the finer diner submitted a proposal, The owner of the Finer D...

The owner of the Finer Diner submitted a proposal to you in hopes of selling the business to you. His asking price is $250,000. Your financial institution advises that your month

Index number, Characteristics of index number

Characteristics of index number

What is account code, The three-character alpha/numeric code allocated by t...

The three-character alpha/numeric code allocated by the Workplace of Economical Control (OFM) to recognize each account.

Two hanging masses, Two blocks with masses and hang one under the other. ...

Two blocks with masses and hang one under the other. For this problem, take the positive direction to be upward, and use for the magnitude of the acceleration due to gravity. Fi

Thermodynamics, Answers for calculate the amount of heat which must be adde...

Answers for calculate the amount of heat which must be added or removed to change the temperature of a gas

Cash disbursements, Cash disbursements Cash disbursements are any or more ...

Cash disbursements Cash disbursements are any or more moneys [egg, checks: money: warrants: credit, debit card amounts: & EFTs [Electronic Fund Transfers) paid by the state during

How Allotment is useful, How Allotment is useful An agency''s plan of appro...

How Allotment is useful An agency''s plan of approximated expenses, income, money payments, and money invoices for monthly of the biennium.

Describe sample space for experiment, The elevator in the Math and Computer...

The elevator in the Math and Computer Building can stop at one of six ?oors. Four riders get on the elevator at the ?rst ?oor and the elevator heads up. Each rider picks a ?oor at

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