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

Arithmetic mean, What are the uses of arithmetic mean?

What are the uses of arithmetic mean?

Example of inference, Q. Example of inference? Ans. Thirty student...

Q. Example of inference? Ans. Thirty students from a college were surveyed and classified according to two variables: (1) gender (M/F) and (2) major (liberal arts, busines

School based assesment, I need help with ledger accounts and the financial ...

I need help with ledger accounts and the financial statement

Basic statistics, Since you have answered the same below question on 2012, ...

Since you have answered the same below question on 2012, can you provide it to me as free of charge this time? if yes, please send it to me on: Question" Case 1: Decision Analysis

Nominal data, what type of analysis is suitable for nominal data?

what type of analysis is suitable for nominal data?

Probability, what is an exclusive probability

what is an exclusive probability

Stat 2331 intro, Textbook The basic practice of statistics, 5th Edition b...

Textbook The basic practice of statistics, 5th Edition by David S. Moore; Freeman EX:14.37, 14.38, 14.39, 17.5, 17.28a

Define the z score, A. Describe what a z score is. B. Explain why they c...

A. Describe what a z score is. B. Explain why they can be used to compare scores from different distributions.

Motion of a plane, what is newton''s law of motion & application?

what is newton''s law of motion & application?

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