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

Lpp, A paper mill produces two grades of paper viz., X and Y. Because of ra...

A paper mill produces two grades of paper viz., X and Y. Because of raw material restrictions, it cannot produce more than 400 tons of grade X paper and 300 tons of grade Y paper i

Analysis and interpretation business report, Case Study. Using the data, pr...

Case Study. Using the data, prepare a report that analyses the profitability, liquidity and solvency of a Accessorize Pty Ltd and help the owner to decided whether to purchase the

Find the probability that a cup of drink chosen at random, Question: (i...

Question: (i) A soft drink machine is regulated so that it fills an average of 300 cL per cup. If the amount of drink in each cup is normally distributed with standard deviati

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

Compute the value for the test statistic-spss, A number of years ago the Am...

A number of years ago the American Academy of Pediatrics recommended that tetracycline drugs not be used for children under the age of 8. Prior to this recommendation, a two-year s

Regression, Tuddenham and Snyder obtained the following results for 66 Cali...

Tuddenham and Snyder obtained the following results for 66 California boysat ages 6 and 18 (the scatter diagram is football-shaped): average height at 6 ˜ 3 feet 10 inches, SD˜1.7

Writing Appropriate Null and Alternative Hypotheses, For this assignment, y...

For this assignment, you will practice creating null and alternative hypotheses of difference based on the presented scenarios. To complete this assignment, consider the three scen

Accounting problem, a business was started on January 1, 2011 and $1000 of ...

a business was started on January 1, 2011 and $1000 of supplies to use in the business. At the end of the month 25% of the supplies remains unpaid and 20% are still on hand. what a

Help, How many different license plate of 5 digits can be made if the most ...

How many different license plate of 5 digits can be made if the most let digit is 4 and the second digit from left is an odd number

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