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 upper and lower control limits, You should show your work to ...

You should show your work to earn partial credit.  You must show ALL of your work on the pages provided.  There should be plenty of room to show your work on the page with each pro

Process costing, discuss the steps in preparing product cost allocation.

discuss the steps in preparing product cost allocation.

Journal entries on perpetual inventory system, I have to set up a chart for...

I have to set up a chart for a perpetual system. How Do I do this with credit card sales?

Biomechanics , what are the biomechanical techniques for swimming freestyle...

what are the biomechanical techniques for swimming freestyle?

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

Linear power supply, Linear Power Supply Uses a transformer to convert volt...

Linear Power Supply Uses a transformer to convert voltage from the mains (wall outlet) to a different voltage. With a transformer present, almost any voltage can be obtained. If a

Three major accounts and their rules, Three major Accounts and their Rules ...

Three major Accounts and their Rules There are three major Records which are a) Personal Accounts b) Real Accounts c) Moderate Accounts Rule for Personal Account: Ch

Plural sense, explain all the nature of statistics

explain all the nature of statistics

one-way anova and hypothesis , Suppose we wanted to compare the somatic co...

Suppose we wanted to compare the somatic complaints (as measured on a scale known as the Physical Symptom Survey or PSS) of three groups of people; nonsmokers, smokers, and people

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