You are looking into putting 2 new stocks into your portfolio. Wolf Cola and Frank's Fluids. Your
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Question:
You are looking into putting 2 new stocks into your portfolio. Wolf Cola and Frank's Fluids. Your stock broker has provided you with the returns for both stocks in a Bear Market, Normal Market and Bull Market the probability of each Market is 1/3 or 33.3333333%.
State of Economy | Wolf Cola Return | Fran's Fluids Return |
Bear | 9.90% | -7.30% |
Normal | 11.30% | 12.80% |
Bull | 5.90% | 29.30% |
You are concerned not only with your expected return but also with the risk you are assuming on each stock.
Since you may put both stocks into your portfolio, you are concerned with how WOLF and FRANK relate to each other over various market scenarios.
Calculate the Expected Return and Standard Deviation for each stock and calculate the correlation between the 2 stocks
Related Book For
Quantitative Analysis for Management
ISBN: 978-0132149112
11th Edition
Authors: Barry render, Ralph m. stair, Michael e. Hanna
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