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, explain tthe two uses of time serie, and the four components o...

explain tthe two uses of time serie, and the four components of time series?

What is the speed of the block, A prevent of huge m = 10 kg is drawn by a p...

A prevent of huge m = 10 kg is drawn by a power F = 100 N at a position q = 30o with the horizontally along a sleek horizontally exterior. What is the speed of the block? (g = 10 m

Anti smoking pills , Company hopes to improve customer satisfaction, setti...

Company hopes to improve customer satisfaction, setting a goal of no more than 5% negative comments. A random survey of 350 customers found only 14 with complaints. Does this provi

Ifrs financial instruments, journal entries of a loan swap with different c...

journal entries of a loan swap with different currency

homework problem which requires data collection using an in, each student ...

each student will be assigned a homework problem which requires data collection using an information system. Two scores are given: 1- adequacy of data collection and relevancy ( M2

Binomial probability distribution, if the probability of getting caught cop...

if the probability of getting caught copying someone else s exam is 0.2 find the probability of not getting caught in 3 attempts assume independence

Management accounting, 19. Welnor Industrial Gas Corporation supplies acety...

19. Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store''s operations follow: • Sales are budgeted at $320,000 fo

Skewnes and kurtosis, which one is better skewed or kurtic distributed data...

which one is better skewed or kurtic distributed data?

Home Assignments, A survey was conducted among the residents of Pune City, ...

A survey was conducted among the residents of Pune City, its suburbs and the Pune Cantonment area. The following three pie diagrams show their respective preferences for living in

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