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

Confidence interval, Ask quesA buffalo, your cola distributor is featuring ...

Ask quesA buffalo, your cola distributor is featuring a super-special sale on 12- packs. She wonders where in the grocery store to place the cola for maximum attention. Should it b

What is appropriate and parametric statistical procedure , Questions 1....

Questions 1.  What would be the appropriate statistical procedure to test the following hypothesis:  "Triglyceride values are a good predictor of weight in obese adults." 2.

Statistics, The amount of time it takes the IRS to send a refund to taxpaye...

The amount of time it takes the IRS to send a refund to taxpayers is normally distributed with a mean of 12 weeks and a standard deviation of 3 weeks. What proportion of the taxpay

Mean and standard deviation, We have two applicants who are applying for a ...

We have two applicants who are applying for a job. They both took the high school exit exam, but different ones. Shannon took the ACT and scored 26, Frank took the SAT scored 1350.

#mode, how to find mode graphically when the biggest rectangle is at the en...

how to find mode graphically when the biggest rectangle is at the end

Jurnal entry, Depreciation on the company''s equipment for 2011 is computed...

Depreciation on the company''s equipment for 2011 is computed to be $16,000.

What after the implementation of ifrs, What after the implementation of IFR...

What after the implementation of IFRS?  Manager 1: IFRS is only the first step towards the change that the SEC is trying to bring in. Firstly it is going to take a couple of year

Analysis in spss, The whole point of organizing data using SPSS software is...

The whole point of organizing data using SPSS software is so that we can manipulate the data to answer our descriptive and inferential questions.  This next section will walk you t

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