You are looking to invest your money in Stock ABC and Stock XYZ. Their historical returns...

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You are looking to invest your money in Stock ABC and Stock XYZ. Their historical returns for the past 6 years are found in the following table. ABC XYZ 2011 -14.11% -5.53% 2012 10.35% 23.94% 2013 -3.60% 24.55% 2014 -20.47% 52.72% 2015 7.34% -12.39% 2016 21.94% -10.33% a) What is the sample standard deviation and average return (arithmetic mean) for each stock? What is the correlation of returns (correlation coefficient)? b) You are thinking of investing in a portfolio containing these 2 stocks. Calculate the return and standard deviation of returns if you held these portfolios for the past 6 years with the following weightings. Portfolio 1 ABC 80% XYZ 20% Portfolio 2 ABC 50% XYZ 50% c) Which Portfolio would you prefer and why? You are looking to invest your money in Stock ABC and Stock XYZ. Their historical returns for the past 6 years are found in the following table. ABC XYZ 2011 -14.11% -5.53% 2012 10.35% 23.94% 2013 -3.60% 24.55% 2014 -20.47% 52.72% 2015 7.34% -12.39% 2016 21.94% -10.33% a) What is the sample standard deviation and average return (arithmetic mean) for each stock? What is the correlation of returns (correlation coefficient)? b) You are thinking of investing in a portfolio containing these 2 stocks. Calculate the return and standard deviation of returns if you held these portfolios for the past 6 years with the following weightings. Portfolio 1 ABC 80% XYZ 20% Portfolio 2 ABC 50% XYZ 50% c) Which Portfolio would you prefer and why?

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a Sample Standard Deviation Average Return and Correlation Coefficient First well calculate the sample standard deviation and average return for each ... View the full answer