This table, contains the annual returns from 2008 to 2017 for two stocks, Consolidated Edison (ED) and Central Valley Community Bancor (CVCY). Use Excel to create a spreadsheet that calculates the average, standard deviation, and correlation coefficient for the two stocks. Just comparing the two stocks in isolation, does one seem more attractive tan the other? Next, calculate the average return and standard deviation for several portfolios, starting with one that invests 100% in ED and 0% in CVCY, then decreasing the percent invested in ED and increasing the investment in CVCY in10% increments until you reach a portfolio of 0% ED and 100% CVCY (that would be 11 portfolios total). Draw a graph showing the standard deviation (x-axis) and average return (y-axis) for each portfolio. What lesson does this exercise illustrate?

Year

Consolidated Edison

Central Valley Community Bancor

2008

15.8%

43.3%

2009

23.1%

9.6%

2010

15.5%

1.7%

2011

31.1%

3.4%

2012

6.9%

43.1%

2013

4.4%

47.5%

2014

25.3%

0.7%

2015

1.1%

11.1%

2016

18.9%

68.7%

2017

19.9%

2.2%