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

Time series, importance of time series analysis?

importance of time series analysis?

Statement, prof. ya-lu-chan definitions statistices

prof. ya-lu-chan definitions statistices

Detemine lambda , A.  A computer rejuvenation facility receives systems fro...

A.  A computer rejuvenation facility receives systems from the fleet at 24 systems/day (assume this is a Poisson process).  It takes the triage function 30 minutes (assumed exponen

Proton-neutron hypothesis, This hypothesis was put forward by Heinsberg aft...

This hypothesis was put forward by Heinsberg after the discovery by Chadwick. According to this hypothesis, a nucleus of mass number A and atomic number Z contains Z protons, and

Total quality management, Statistical process control, a methodology used f...

Statistical process control, a methodology used for controlling and improving the outcomes of operational processes, has been in use for almost 100 years!  It was widely used in ma

Quantitative techniques and decision making, Let the national income model ...

Let the national income model be: Y= c+1+G C=20+0.6y I=0.2y G=20 Where y= income, C= consumption, I= investment and G=government expenditure find y, C and I from the model. By quan

Explain the attribute accounting, Explain the Attribute Accounting Plann...

Explain the Attribute Accounting Planning the accounting on foundation Producing, Explanation and outlining for customers is an art and if we consider as per technology, the sig

Cash basis, Cash basis A basis for accounting whereby revenues are recorde...

Cash basis A basis for accounting whereby revenues are recorded only when received & expenses are recorded only that salaried with no regard to the era in which they be earned, in

To find first quartile, how to find 1st quartile from the graph of more tha...

how to find 1st quartile from the graph of more than ogive type, please reply me with an example

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