The Table below shows the returns for three stocks, and portfolios of Pairs of Stocks Stock Returns Portfolio Returns Year North Air West Air Tex Oil 1/2RN + 1/2W 1/2RW + 1/2T 2010 21% 9% -2% 15.0% 3.5% 2011 30% 21% -5% 25.5% 8.0% 2012 7% 7% 9% 7.0% 8.0% 2013 -5% -2% 21% -3.5% 9.5% 2014 -2% -5% 30% -3.5% 12.5% 2015 9% 30% 7% 19.5% 18.5% Average Return 10.0% 10.0% 10.0% 10.0% 10.0% Volatility 13.4% 13.4% 13.4% 21.1% 5.1% Required: 1. From the three stocks in the above table, comment on the volatility and average return, and the pattern of the returns 2. Which portfolio (combination of stocks), eliminated the highest risk? And what could be the plausible reason for that? 3. Compute the covariance and correlation between pairs of stocks (North Air & West Air ; and West Air and Text oil)
Question 40
The Table below shows the returns for three stocks, and portfolios of Pairs of Stocks
|
|
Stock Returns |
Portfolio Returns |
|||
|
Year |
North Air |
West Air |
Tex Oil |
1/2RN + 1/2W |
1/2RW + 1/2T |
|
2010 |
21% |
9% |
-2% |
15.0% |
3.5% |
|
2011 |
30% |
21% |
-5% |
25.5% |
8.0% |
|
2012 |
7% |
7% |
9% |
7.0% |
8.0% |
|
2013 |
-5% |
-2% |
21% |
-3.5% |
9.5% |
|
2014 |
-2% |
-5% |
30% |
-3.5% |
12.5% |
|
2015 |
9% |
30% |
7% |
19.5% |
18.5% |
|
Average Return |
10.0% |
10.0% |
10.0% |
10.0% |
10.0% |
|
Volatility |
13.4% |
13.4% |
13.4% |
21.1% |
5.1% |
Required:
1. From the three stocks in the above table, comment on the volatility and average return, and the pattern of the returns
2. Which portfolio (combination of stocks), eliminated the highest risk? And what could be the plausible reason for that?
3. Compute the
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