2. (8 marks) Calculate the return and risk (standard deviation) of each stock. Amazon = 415%...

 

 

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2. (8 marks) Calculate the return and risk (standard deviation) of each stock. Amazon = 415% return & 0.3055 standard deviation (30.055% risk) Alibaba = 88% return & 0.5292 standard deviation (52.9224% risk) Kogan = 261% return & 1.7784 standard deviation (177.8406% risk) China Petroleum & Chemical = -6% return & 0.3054 standard deviation (30.5365% risk) Year Amazon (NASDAQ: AMZN) Alibaba (NYSE: BABA) Kogan (ASX: KZN) China Petroleum & Chemical (HKG: 386) 2016 587 67.03 1.715 4.33 2017 823.48 101.31 1.53 6.21 2018 1450.89 204.29 7.15 6.76 2019 1718.73 168.49 4.3 6.57 2020 2008.72 206.59 5.16 4.13 2021 3206.2 253.83 17.99 3.17 2022 2991.47 125.79 6.19 4.08 4. (4 marks) Calculate the correlation coefficient between (1) Amazon and Alibaba, and (2) Amazon and China Petroleum & Chemical. Amazon and Alibaba = 0.6427 (strong positive linear correlation) Amazon and China Petroleum & Chemical = -0.5749 (moderate negative linear correlation) 5. (3 marks) Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Amazon and 50% in Alibaba. Expected annual return = 27.9188% (16.6666%*40%)+(16.6666%*76%)+(16.6666%*18%)+(16.6666%*17%)+(16.6666%* 60%)+(16.6666%*-7%) + (16.6666%*51%)+(16.6666%*102%)+(16.6666%*- 18%)+(16.6666%*23%)+(16.6666%*23%)+(16.6666%*-50%) / 2 Standard Deviation = 0.1453 (0.5)^2*(0.3055)^2+(0.5)^2* (0.5292)^2+2*(0.5)* (0.5)*(0.6427)*(0.3055)* (0.5292) 6. (3 marks) Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 80% in Amazon and 20% in China Petroleum. Page 6 of 7 Expected annual return = 27.8756% 0.8x(16.6666%x40%)+(16.6666%*76%)+(16.6666%*18%)+(16.6666%*17%)+(16.6666 %*60%) + 0.2x (16.6666%*43%)+(16.6666%*9%)+(16.6666%*-3%)+(16.6666%*- 37%)+(16.6666%*-23%)+(16.6666%*29%) Standard Deviation = 0.046299079 (0.8)^2*(0.3055)^2+(0.2)^2* (0.305365)^2+2* (0.8)* (0.2) * (negative0.5749)* (0.3055)* (0.305365) 2. (8 marks) Calculate the return and risk (standard deviation) of each stock. Amazon = 415% return & 0.3055 standard deviation (30.055% risk) Alibaba = 88% return & 0.5292 standard deviation (52.9224% risk) Kogan = 261% return & 1.7784 standard deviation (177.8406% risk) China Petroleum & Chemical = -6% return & 0.3054 standard deviation (30.5365% risk) Year Amazon (NASDAQ: AMZN) Alibaba (NYSE: BABA) Kogan (ASX: KZN) China Petroleum & Chemical (HKG: 386) 2016 587 67.03 1.715 4.33 2017 823.48 101.31 1.53 6.21 2018 1450.89 204.29 7.15 6.76 2019 1718.73 168.49 4.3 6.57 2020 2008.72 206.59 5.16 4.13 2021 3206.2 253.83 17.99 3.17 2022 2991.47 125.79 6.19 4.08 4. (4 marks) Calculate the correlation coefficient between (1) Amazon and Alibaba, and (2) Amazon and China Petroleum & Chemical. Amazon and Alibaba = 0.6427 (strong positive linear correlation) Amazon and China Petroleum & Chemical = -0.5749 (moderate negative linear correlation) 5. (3 marks) Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Amazon and 50% in Alibaba. Expected annual return = 27.9188% (16.6666%*40%)+(16.6666%*76%)+(16.6666%*18%)+(16.6666%*17%)+(16.6666%* 60%)+(16.6666%*-7%) + (16.6666%*51%)+(16.6666%*102%)+(16.6666%*- 18%)+(16.6666%*23%)+(16.6666%*23%)+(16.6666%*-50%) / 2 Standard Deviation = 0.1453 (0.5)^2*(0.3055)^2+(0.5)^2* (0.5292)^2+2*(0.5)* (0.5)*(0.6427)*(0.3055)* (0.5292) 6. (3 marks) Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 80% in Amazon and 20% in China Petroleum. Page 6 of 7 Expected annual return = 27.8756% 0.8x(16.6666%x40%)+(16.6666%*76%)+(16.6666%*18%)+(16.6666%*17%)+(16.6666 %*60%) + 0.2x (16.6666%*43%)+(16.6666%*9%)+(16.6666%*-3%)+(16.6666%*- 37%)+(16.6666%*-23%)+(16.6666%*29%) Standard Deviation = 0.046299079 (0.8)^2*(0.3055)^2+(0.2)^2* (0.305365)^2+2* (0.8)* (0.2) * (negative0.5749)* (0.3055)* (0.305365)