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

Historigram, what is historigram in statistics please give the problems and...

what is historigram in statistics please give the problems and there solution in statistics as soon as possible

Statistical inference is that branch of statistics, Statistical inference i...

Statistical inference is that branch of statistics Statistical inference is that branch of statistics which is concerned with using probability concept to deal with uncertainty

Calculate the Average Mean Temperature, The following are actual data showi...

The following are actual data showing the latitude of a sample of major cities in the northern hemisphere and their mean high annual temperature. latitude(X)

Tally, what is meant by tally

what is meant by tally

Example, solving problem in skewness and kurtosis?

solving problem in skewness and kurtosis?

Difference in the loss in man-hours - accidents in firms, An occupational h...

An occupational health inspector was interested in determining whether there is a difference in the loss in man-hours due to accidents  by introducing a new safety programme.  The

Sample space of an experiment, 1.The resumés of 2 males applicants for a co...

1.The resumés of 2 males applicants for a college teaching position in chemistry are places in the same file as the resumés of 2 female applicants. Two positions become available a

Find the invariant probability, Problem 1 . Let X 0 ;X 1 ;X 2 . . . be a Ma...

Problem 1 . Let X 0 ;X 1 ;X 2 . . . be a Markov chain with state space f1; 2g and transition probabilities given as follows: p 11 = 0:3; p 12 = 0:7; p 21 = 0:5; p 22 = 0:5:

#binomial probability, they gave me n=30 and p=.23 to get the answers for P...

they gave me n=30 and p=.23 to get the answers for P(20,x,23)= and P(x.23)=

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