In: Finance
Shares A and B have the following returns:
Stock A |
Stock B |
||
1 |
0.08 |
0.06 |
|
2 |
0.06 |
0.04 |
|
3 |
0.12 |
0.05 |
|
4 |
−0.05 |
0.03 |
|
5 |
0.09 |
−0.02 |
a. What are the expected returns of the two shares?
b. What are the standard deviations of the returns of the two shares?
c. If their correlation is
0.44,
what is the expected return and standard deviation of a portfolio of
52%
share A and
48%
share B?
calculations-
Note- | ||
Average Return = Sum of returns/ No. of years | ||
Variance = Sum of (Return - Avg return )^2 /(No. of years -1) | ||
Standard deviation = Squareroot (Variance) |
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