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

Level of significance, Consider the sample data for plants A, B, C & D of t...

Consider the sample data for plants A, B, C & D of the above company, which are tabulated in table 1. Test whether the four means are equal at the 5% level of significance. Perform

When are expenses credited, When are expenses credited? While common jo...

When are expenses credited? While common journal cost records are typically debited and have debit account balances, there are times when the cost records are acknowledged.

Air wedge experiment , describe the air wedge experiment to determine the t...

describe the air wedge experiment to determine the thickness of a wire

Experimental design, What is the difference between multiple independent va...

What is the difference between multiple independent variables and multiple levels of independent variables are that multiple independent variables sk question #Minimum 100 words ac

Essentials of statistics for behavioral sciences, it seems that 14% of enga...

it seems that 14% of engaged women buy a wedding dress at least one size smaller than their current size

Find the mean and standard deviation, A travel agency surveyed 38 customers...

A travel agency surveyed 38 customers holidaying in Australia who took their spouses on either a skiing or a golfing vacation.  The data comprises amounts (in hundreds of dollars).

Test statistic and the p-value, An experimental surgical procedure is being...

An experimental surgical procedure is being studied as an alternative to the old method. Both methods are considered safe, but the new method has the potential to reduce operating

Want to get job, I am Hussain and I have done master in Statistics. Current...

I am Hussain and I have done master in Statistics. Currently I am doing Mphil Statistics from Pakistan. I want to get online Statistics Tutor job. So contact with me as soon as pos

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