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

Construct simulation model-estimate the probability, CBT has agreed to fina...

CBT has agreed to finance the needs of a stereo wholesaler for the next month. To complete the loan agreement, the wholesaler must estimate the cash on hand during the first 90 day

Eviews Task, I have one task to be done on Eviews.

I have one task to be done on Eviews.

Statistics help, Ask question #Minimum 100 words accepteWhen all factors ar...

Ask question #Minimum 100 words accepteWhen all factors are taken into account, an insurance company estimates that the probability of my father making a claim for damages to his p

Introduction of management accounting, Introduction of Management Accountin...

Introduction of Management Accounting Management accounting or managing sales is worried with the conditions and use of sales details to professionals within companies, to off

CHI-SQUARE, proof that the square of a normal distribution will give a chi-...

proof that the square of a normal distribution will give a chi-square

Historigram, what is historigram in statistics please give the problems and...

what is historigram in statistics please give the problems and there solution in statistics as soon as possible

Statistics for people who hate statistics, what third variable might effect...

what third variable might effect fathers gpa and childs social skills

Adaptations, what are flatworms adaptations

what are flatworms adaptations

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