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

Determine ytm price formula, YTM can be determined using the price formula...

YTM can be determined using the price formula of a bond. Part a The present value (price) formula for a zero coupon bond is: PV = F/(1+i) n Plugging in the given inf

Calculate and interpret the measures of dispersion for data, You are workin...

You are working for the management of ESK Jewellery as a marketing consultant. The main business of ESK Jewellery is the retailing of diamond jewellery. They opened their first sho

Accounting standards in united states, United States: There are currently ...

United States: There are currently more than 10000 companies that are registered with the SEC (Securities Exchange Commission). Of these, around 1000 are non US companies. The non

Determine the sources of data, The next step is to determine the sources of...

The next step is to determine the sources of data to be used. The researcher has to decide whether he has to collect primary data ror depend exclusively on secondary data. Sometime

Probability, #question An electronic assembly is subjected to a final funct...

#question An electronic assembly is subjected to a final functional test. Suppose that defects occur at random in these assemblies, and that these defects occur according to a Pois

#title.regression., regression line drawn as y=c+1075x,when x was 2,and y w...

regression line drawn as y=c+1075x,when x was 2,and y was 239,given that y intercept was 11.calculate the residual

Calculate its stationary probabilities, A small specialized workshop is use...

A small specialized workshop is used to perform periodic check-up on some high-tech devices. The check up is made in three stages whose durations are independent random variables w

Depreciation application procedure, Depreciation Application procedure. ...

Depreciation Application procedure. Under this technique devaluation is incurred immediately to the Resources Consideration for example if 10% of devaluation is being incurred o

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