Action Item: Build a correlation table for the 5 companies.

5 Year Returns: Data Collection
	BAC	JPM	WFC	MSFT	TGT
2017	28.01%	23.92%	6.94%	40.25%	3.15%
2018	1.95%	10.03%	(18.41)%	20.89%	(5.52)%
2019	43.63%	42.57%	18.44%	56.34%	31.77%
2020	(32.65)%	(28.76)%	(44.78)%	42.55%	31.33%
2021	67.70%	38.14%	56.87%	47.97%	20.18%
Company Correlation Coefficients
Correlation Table	BAC	JPM	WFC	MSFT	TGT
BAC	1	0.95	0.99	0.48	0.02
JPM	0.95	1	0.88	0.40	(0.08)
WFC	0.99	0.88	1	0.48	0.06
MSFT	0.48	0.40	0.48	1	0.83
TGT	0.02	(0.08)	0.06	0.83	1

• Action item:explain how investors can use correlation coefficients to analyze diversification of their portfolios.

• Action Item:consider the correlation coefficients for BAC, JPM and WFC: are the results what you would expect? Is there anything surprising in the results? Explain.

• Action Item:assume this is your portfolio. Does your portfolio have a high degree of diversification? Explain why or why not.

Part III: Rebuild Your Portfolio to Be More Diverse

• Action item.Explain how you could improve the degree of diversification of your portfolio by replacing two of the companies in this 5-company portfolio.

• Action Item:re-create the correlation table with your two replacement companies. (You may use Tab 3 "New Portfolio Correlation" of the Excel workbook to organize your information and perform calculations.)

• Action Item:Explain why your new portfolio is more diverse than the original.