1. Create a hypothetical portfolio invested equally in five stocks from the following industries: Consumer Staples, Technology,...

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Question:

1. Create a hypothetical portfolio invested equally in five stocks from the following industries: Consumer Staples, Technology, Financial, Energy, and Retail (You may select any companies that you wish from each industry. However, it does make the assignment more interesting if you select at least one company that has underperformed in general). We will refer to this as the equally weighted portfolio. (Walmart, Samsung, Bank of America, Apache Corporation and Kohl's)

2. Calculate the investment returns for each stock in your portfolio, the S&P 500 index, and the equally weighted portfolio for 2017 YTD, 2016, & the past 3yrs. What observations can you make about the performance of your equally weighted portfolio (Hint: Some points you may choose to consider include; market correlation, stock specific volatility, overall factors affecting the industry such as commodity prices, etc.)?

3. Calculate the beta for each of your stocks and compare your results with the figures found in Yahoo Finance. Calculate the intrinsic value for each company using the Dividend discount model (You can use a 4.6% risk premium & 2.4% risk free rate for simplicity). Compare the current stock price to the intrinsic value and discuss the rationale for any noticeable differences. Discuss and compare the stock performance for each company, the S&P 500, and the equally weighted portfolio over the last 18 months (Hint: Select dividend paying stocks for your portfolio)

4. How risky is your portfolio compared to the overall stock market? Do the historical returns justify the risks? (Hint: You will want to use a specific measure such as beta, standard deviation, etc. to accurately assess the risk in your portfolio)

5. Create a correlation matrix using the stocks in your portfolio and the S&P 500. What observations can you make regarding risk to the individual stocks in the portfolio, given the current and future economic environment (Hint: You should be making connections using relevant economic variables and indicators)?