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

Description of sample at baseline, Description of Sample at Baseline 1...

Description of Sample at Baseline 1. Describe the sample characteristics and baseline values, comparing the two groups'characteristics. With any analysis, the first step

Vectors, What do u mean by Vectors? Explain its types.

What do u mean by Vectors? Explain its types.

Adaptive sampling design, Adaptive sampling design   The sampling de...

Adaptive sampling design   The sampling design in which the method for selecting  the sampling Units on which to make observations might rely on the observed values of the v

Variance analysis, Variance analysis In spending budget (or control sales ...

Variance analysis In spending budget (or control sales in general), a change is the change between an allocated, thought out or conventional quantity and the actual quantity incur

Define the z score, A. Describe what a z score is. B. Explain why they c...

A. Describe what a z score is. B. Explain why they can be used to compare scores from different distributions.

Automated clearing house (ach) , Automated clearing house (ach) A across ...

Automated clearing house (ach) A across the country settlement and selection program that provides for automated submission and arrangement of resources. Although the phrase Elec

Inventory control, Inventory control Inventory Control is the guidance of ...

Inventory control Inventory Control is the guidance of provide, storage and convenience of items to ensure an adequate provide without excessive oversupply. It can also be known a

Job cost sheet, Manchester Custom Fabricating Company uses a job order syst...

Manchester Custom Fabricating Company uses a job order system. At the beginning of May, Manchester had two jobs in process, Job #22 (DM = $600 and DL = $780), and Job #23 (DM = $75

Payroll, is about deductions

is about deductions

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