The following table contains annual returns for the stocks of Home Depot (HD) and Lowes (LOW). The
Question:
The following table contains annual returns for the stocks of Home Depot (HD) and Lowe’s (LOW). The returns are calculated using end-of-year prices (adjusted for dividends and stock splits) retrieved from http://www.finance.yahoo.com/. Use Excel to create a spreadsheet that calculates the return that an equally weighted portfolio of these two stocks would have earned in each year. Then calculate the average return and standard deviation for each stock over this period. Next, calculate the average return and standard deviation for a portfolio that invests 50% in HD and 50% in LOW. What is the correlation between HD and LOW returns over this period?
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 HD Returns -4.3% 1.0% -31.1% -11.4% 30.5% 25.0% 23.5% 50.3% 35.9% 30.2% 28.6% 4.0% 44.6% LOW Returns 16.1% -6.1% -26.8% -3.3% 10.6% 9.2% 3.4% 42.9% 41.8% 41.2% 12.1% -0.1% 26.9%
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Excel formulas average stdevs correl You can also calculate it directly if you first find the p...View the full answer
Fundamentals Of Investing
ISBN: 9780135175217
14th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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