You are considering investing in two securities, X and Y. The following data are available for the two securities: Chapter 8, Problem 5P, You are considering investing in two securities, X and Y. The following data are available for the a. If you invest 40 percent of your funds in Security X and 60 percent in Security Y and if the correlation of returns between X and Y is +0.5, compute the following: i. The expected return from the portfolio ii. The standard deviation of returns from the portfolio b. What happens to the expected return and standard deviation of returns of the portfolio in Part a if 70 percent of your funds are invested in Security X and 30 percent of your funds are invested in Security Y? c. What happens to the expected return and standard deviation of returns of the portfolio in Part a if the following conditions exist? i. The correlation of returns between Securities X and Y is +1.0. ii. The correlation of returns between Securities X and Y is 0. iii. The correlation of returns between Securities X and Y is -0.7.

You are considering investing in two securities, X and Y. The following data are available for the two securities: Chapter 8, Problem 5P, You are considering investing in two securities, X and Y. The following data are available for the a. If you invest 40 percent of your funds in Security X and 60 percent in Security Y and if the correlation of returns between X and Y is +0.5, compute the following: i. The expected return from the portfolio ii. The standard deviation of returns from the portfolio b. What happens to the expected return and standard deviation of returns of the portfolio in Part a if 70 percent of your funds are invested in Security X and 30 percent of your funds are invested in Security Y? c. What happens to the expected return and standard deviation of returns of the portfolio in Part a if the following conditions exist? i. The correlation of returns between Securities X and Y is +1.0. ii. The correlation of returns between Securities X and Y is 0. iii. The correlation of returns between Securities X and Y is -0.7.

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Concept explainers

Correlation

Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.

Linear Correlation

A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.

Regression Analysis

Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.

Question

You are considering investing in two securities, X and Y. The
following data are available for the two securities:
Chapter 8, Problem 5P, You are considering investing in two
securities, X and Y. The following data are available for the
a. If you invest 40 percent of your funds in Security X and 60
percent in Security Y and if the correlation of returns between X
and Y is +0.5, compute the following:
i. The expected return from the portfolio
ii. The standard deviation of returns from the portfolio
b. What happens to the expected return and standard deviation
of returns of the portfolio in Part a if 70 percent of your funds
are invested in Security X and 30 percent of your funds are
invested in Security Y?
c. What happens to the expected return and standard deviation
of returns of the portfolio in Part a if the following conditions
exist?
i. The correlation of returns between Securities X and Y is
+1.0.
ii. The correlation of returns between Securities X and Y is
0.
iii. The correlation of returns between Securities X and Y
is -0.7.

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