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

What is degrees of freedom, What is  Degrees of Freedom : While comparing ...

What is  Degrees of Freedom : While comparing the calculated value of X2 with the table value we have to determine the degrees of freedom. By degrees of freedom we mean the number

Chapter 7, A study of long term phone calls made from general electricss co...

A study of long term phone calls made from general electricss corporate headquarters in fairfeild, conneticuit, revealed the length of the calls, in minutes follows the normal prob

Regarding trial balance, does interest realized come under debit or credit ...

does interest realized come under debit or credit side of trial balance pleases i need answer

Financial statements, Write a report to an investor by comparing the financ...

Write a report to an investor by comparing the financial statements for two different companies

Hypotheses- sampling methodology or data collection design, Research Assign...

Research Assignment for Quantitative Methods 2 Purpose: To design, undertake and analyse research on a negotiated project, possible themes could be any one of the following:

Business tax accounting , #questLester rents his vacation home for 6 months...

#questLester rents his vacation home for 6 months and lives in the home during the other 6 months of 2010. The gross rental income from the home is $4,500. For the entire year, rea

What is bond premium and face value of bond, Defining of bond premium in te...

Defining of bond premium in terms of the amount paid over the face value of the bond. And the amount over and above the Face Value of bond which the purchaser pays is called Bond P

Time series, importance of time series analysis?

importance of time series analysis?

Define payroll accounting, It's a fact of business–if an organization has w...

It's a fact of business–if an organization has workers, it has to account for paycheck and edge advantages. In this description of paycheck bookkeeping we'll present paycheck, e

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