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

Spectral Hydrogen Atom, Long before Bohr gave his theory of hydrogen atom, ...

Long before Bohr gave his theory of hydrogen atom, various scientists had observed experimentally, the spectral series of hydrogen atom. Bohr offered a theoretical explanation of t

Assumed means deviations in f2 test, Assumed Means Deviations in F2 Test : ...

Assumed Means Deviations in F2 Test : When actual means of X and Y variables are in fractions the calculations can be simplified by taking the deviations from assumed means. When d

Pivot table, The Pivot table is as below: Values ...

The Pivot table is as below: Values Row Labels Sum of ID Sum of Risk Level A 69

Confidence interval, 1. Provide an overview of the scenario and the variabl...

1. Provide an overview of the scenario and the variable involved. Include an explanation of why and how constructing the confidence interval adds value. I.e., why might this inform

Parametric and non-parametric stats tests, What is the difference between p...

What is the difference between parametric and non-parametric stats tests? What is the difference between parametric and non-parametric stats tests? Different kinds or levels of d

Completely randomized design, Ask question #MinimumAgency revenues. An econ...

Ask question #MinimumAgency revenues. An economic consultant was retained by a large employment agency in a metropolitan area to develop a regression model for predicting monthly a

Spss assignment, Hi I have an assignment due of business statics on spss so...

Hi I have an assignment due of business statics on spss software

What is the net book value of a noncurrent asset, What is the net book valu...

What is the net book value of a noncurrent asset? The net publication value of a noncurrent resource is the net quantity revealed on the stability piece for a long-term resourc

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