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

Spss, what is spss explain in breif

what is spss explain in breif

Find the distribution function, The probability density function (pdf) of X...

The probability density function (pdf) of X is given by f(x) =   (1-x/2  if          0 ≤ x           (0                    otherwise a. Verify that that f(x) is a legitim

Individual tax accounting, need help with exercise that asks to calculate g...

need help with exercise that asks to calculate gross income, adjusted gross income and taxable income based on items1-13, which i can submit the exercise copies as soon as you tell

What is owner’s equity, What is owner’s equity? Owner’s value is on...

What is owner’s equity? Owner’s value is one of the three primary elements of a single proprietorship’s stability piece and bookkeeping situation. Owner’s value symbolizes

Normal reaction, Normal Reaction: When two materials are in get in touch wi...

Normal Reaction: When two materials are in get in touch with, then the materials put out makes on each other. The makes are reverse to each other in route and are similar to each o

Court-ordered withholdings, Court-ordered withholdings Paycheck account...

Court-ordered withholdings Paycheck accounting also includes withholdings for items other than payroll taxation. For example, legal courts of law may purchase business employer

#mean, when is mode illdefined

when is mode illdefined

Normal curve and the standard deviation, What is the relationship between t...

What is the relationship between the normal curve and the standard deviation? Name and explain three special features of a normal distribution

Distribution values, find a distribution with 10 values between 0 and 10 th...

find a distribution with 10 values between 0 and 10 that has as large a variance as possible

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