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Stock Project Fall 2018

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STOCK PROJECT – FALL 2018 1 Analysis of Risk and Return, Portfolio Diversification Student Name Instructor Date STOCK PROJECT – FALL 2018 2 PART A Analysis of risk and return, portfolio diversification Exercise 1 The average return of the three stocks are as follows; IBM average return = -0.06% with the formula (=AVERAGE (E3:E62)), Microsoft Average Return = 2.31% with the formula (=AVERAGE (F3:F62)), S&P500 stock return = 1.01% with the formula (=AVERAGE (G3:G62)). Standard Deviation of Returns of the three stocks are; IBM stock= 0.002565 formula (=VAR (E3:E62)), Microsoft stock=0.003611(=VAR (F3:F62)), S&P500 = 0.000726(=VAR (G3:G62)). The variance of returns of the stocks (VAR.S); IBM = 0.002565 (=VAR (E3:E62)) Microsoft = 0.003611(=VAR (F3:F62)) S&P500 = 0.000726(=VAR (G3:G62)).The covariance between stock 1 and stock 2 is 0.000715 which is obtained using the formula =COVAR (E3:E62, F3:F62) in the excel spreadsheet. The covariance figure of 0.000715 shows that there is weak variation between stock 1 and stock 2.The correlation between the returns of stock 1 and stock 2 is given by the formula =CORREL (E3:E62, F3:F62) and the correlation is 0.238801. The correlation figure of 0.238801 shows that there is a low positive correlation between the return of stock 1 and return of stock 2 and therefore showing than there is weak tendency that the stock1 and stock two changes together. The following is the Excel spreadsheet computation for the average return, standard de ...
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