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 the probability of coding region , Using 1 st order models shown...

Using 1 st order models shown in homework 2 solution determine the probability of coding region in frame two for DNA fragment AGTAGCTTCCAG. Use only parameters provided in the hom

Amount to be provided for retirement of long-term obligation, Amount to be ...

Amount to be provided for retirement of long-term obligations An “other debit” common journal value used in the General Long-Term Bills Additional Consideration that symbolizes t

Midterm & final exams , Can you all help with midterms and final exams? mea...

Can you all help with midterms and final exams? meaning getting the assignment done within a couple hours?

Revenue Recognition & Depreciation, Question 2 Pankratov Lakes is a new rec...

Question 2 Pankratov Lakes is a new recreational real estate development that consist of 500 Lake front and lake view lots. As a special incentive to the first 100 buyers of lake v

Define accounting Actuarial basis , A basis used in processing the quantity...

A basis used in processing the quantity of advantages to be created regularly to a finance or consideration so that the complete advantages plus the complicated income thereon will

Convexity and concavity, Show that for a single-output technology, Y is con...

Show that for a single-output technology, Y is convex if and only if the production function f (z) is concave.

Conditional probability, The U.S. Department of Transportation reported tha...

The U.S. Department of Transportation reported that during November, 83.4% of Southwest Airlines’ flights, 75.1% of US Airways’ flights, and 70.1% of JetBlue’s flights arrived on t

50p3, How do I calculate 50p3?

How do I calculate 50p3?

Asked in genpact interview, Expenses a/c. Dr. To vendor a/c. Cr. What is a...

Expenses a/c. Dr. To vendor a/c. Cr. What is an impact of this transaction on business

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