Co-relation, statistics, Co-relation: Co-relation in this case studies the behavior how, Basic Statistics

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.

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages

Co-relation, statistics, Basic Statistics

Related Discussions:- Co-relation, statistics

Find the probability density function, The lifetime T (in days) of an elect...

Time seires, explain time series analysis

Frequency, frequency distribution

Cost accounting, difference between financial statement and annual report ....

Population, Explain what is meant by population and sample

Projectile motion, A fox fleeing from a hunter encounters a 0.730 m tall fe...

Four characteristics and functions of statistics, highlight four characteri...

SPSS, Assignments due 9/14/2012 Need pricing

Define right selling and buying strategy, Mr. Palsson plans to buy a MacBoo...

Evaluation, what is evaluation?

Write Your Message!

Featured Services

Online Tutoring

Project Development

Exam Preparation

Course Help

Assignment Help

Popular Subjects

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT