first company second comany - Compute monthly returns for the two stocks and the
ID: 2756994 • Letter: F
Question
first company
second comany
- Compute monthly returns for the two stocks and the portfolio. The weights to invest in stock 1 is .4 and the remainder is to be invested in B
- Asset and portfolio’s expected return and variance using historical data.
- The correlation and the covariance in returns between the two stocks
(please can you show me the steps and the formula used)
Month closing prices previous closing prices Jan 130.4 130.9 Feb 129.5 130.4 Mar 133.6 129.5 Apr 135 133.6 May 149.4 135 Jun 157.4 149.4 Jul 177 157.4 Aug 167.5 177 Sep 166.8 167.5 Oct 166 166.8 Nov 172 166 Dec 172 172Explanation / Answer
A B B-A (B-A)/B*100 Month closing prices previous closing prices monthly return in $ monthly return in % Jan 130.4 130.9 0.5 0.4% Feb 129.5 130.4 0.9 0.7% Mar 133.6 129.5 -4.1 -3.2% Apr 135 133.6 -1.4 -1.0% May 149.4 135 -14.4 -10.7% Jun 157.4 149.4 -8 -5.4% Jul 177 157.4 -19.6 -12.5% Aug 167.5 177 9.5 5.4% Sep 166.8 167.5 0.7 0.4% Oct 166 166.8 0.8 0.5% Nov 172 166 -6 -3.6% Dec 172 172 0 0.0% TOTAL -29.0% Expecteced return -2.9% second comany A B B-A Month closing prices previous closing prices monthly return in $ monthly return in % Jan 73.9 75 1.1 1.5% Feb 71.5 73.9 2.4 3.2% Mar 70.9 71.5 0.6 0.8% Apr 69 70.9 1.9 2.7% May 68.9 69 0.1 0.1% Jun 68.1 68.9 0.8 1.2% Jul 68.9 68.1 -0.8 -1.2% Aug 69.8 68.9 -0.9 -1.3% Sep 68.7 69.8 1.1 1.6% Oct 67.7 68.7 1 1.5% Nov 69.8 67.7 -2.1 -3.1% Dec 69 69.8 0.8 1.1% TOTAL 8.1% Portfolio return: Expecteced return 0.8% Frist company return Second company return first*.4+second*.6 monthly return in % monthly return in % Portfolio monthly return 0.38% 1.47% 1.03% 0.69% 3.25% 2.22% -3.17% 0.84% -0.76% -1.05% 2.68% 1.19% -10.67% 0.14% -4.18% -5.35% 1.16% -1.45% -12.45% -1.17% -5.69% 5.37% -1.31% 1.36% 0.42% 1.58% 1.11% 0.48% 1.46% 1.07% -3.61% -3.10% -3.31% 0.00% 1.15% 0.69% TOTAL -6.71% Expected return portfolio -0.56%
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