What is the correlation between stocks? How does correlation play a part of portfolio construction? 3....

 

Transcribed Image Text:

What is the correlation between stocks? How does correlation play a part of portfolio construction? 3. Compute the "beta" for each stock. What does beta measure? (Use SPY as the measurement of the Market). How does the beta rank for each stock? How does this relate to your previous answers? What is the portfolio beta (for the equally weighed)? What does it indicate? 4. What is the required rate of return for each stock (CAPM)? What is the CAPM for the (equally-weighed) portfolio? Explain the number and put it into context? (Use the average Risk-Free rate given below). 5. In what stock(s) (if any) should Daniel invest in? Make a recommendation of what you would do if you were Daniel. What portfolio construction would you recommend? Why? Would you try something different? Write this report in sections, make sure each section has a heading. The first section: Risk and Return of each individual stock (Q. 1). Second section: portfolio risk and return (Q. 2). Section 5: Market risk (Q. 3). Section 4: Expected Return (Q. 4). And finally, Section 5: Recommendation (Q. 5). What is the correlation between stocks? How does correlation play a part of portfolio construction? 3. Compute the "beta" for each stock. What does beta measure? (Use SPY as the measurement of the Market). How does the beta rank for each stock? How does this relate to your previous answers? What is the portfolio beta (for the equally weighed)? What does it indicate? 4. What is the required rate of return for each stock (CAPM)? What is the CAPM for the (equally-weighed) portfolio? Explain the number and put it into context? (Use the average Risk-Free rate given below). 5. In what stock(s) (if any) should Daniel invest in? Make a recommendation of what you would do if you were Daniel. What portfolio construction would you recommend? Why? Would you try something different? Write this report in sections, make sure each section has a heading. The first section: Risk and Return of each individual stock (Q. 1). Second section: portfolio risk and return (Q. 2). Section 5: Market risk (Q. 3). Section 4: Expected Return (Q. 4). And finally, Section 5: Recommendation (Q. 5).

Answer rating: 100% (QA)

Report Risk and Return Analysis for Stock Portfolio Section 1 Risk and Return of Each Individual Stock In this section we will evaluate the risk and return characteristics of each individual stock in ... View the full answer