You are working as junior analyst at Investment.Com and have been asked to undertake some analysis for the senior management team. Gather historical data on price for a one-year period for an index and one stock of your choice (the equity should be traded on the index selected). This should be downloaded into Microsoft excel.

Carry out a preliminary analysis of the relationship between the stock price and the index using descriptive statistics. Using correlation and regression analysis undertake a more detailed analysis of the relationship between the equity and the index. Average returns of index Average returns of stock SD of index SD of stock 0.09% 0.37% 1.13% 2.83%

Correaltion 0.728102076 Covariance 0.000233851 Provide a detailed account of the assumptions underlying correlation and regression analysis as well as their limitations in analysis for this task.

Answer rating: 100% (QA)

Assumptions Underlying Correlation and Regression Analysis Linearity Both correlation and regression analysis assume that there is a linear relationsh... View the full answer