Question

In: Finance

^AORD RIO ANZ WES TLS Date Adj Close Adj Close Adj Close Adj Close Adj Close...

^AORD RIO ANZ WES TLS
Date Adj Close Adj Close Adj Close Adj Close Adj Close
31/1/13 5120.4 66.36 19.84806 19.57102 3.212754
28/2/13 4979.9 67.05 19.71675 19.69255 3.255187
31/3/13 5168.6 57.2 22.00425 21.24546 3.594419
30/4/13 4914 55.8 19.03257 19.22232 3.421195
31/5/13 4775.4 55.18 20.2205 19.39867 3.442847
30/6/13 5035.7 52.37 21.05536 19.86891 3.601637
31/7/13 5125.3 57.51 21.00583 19.91794 3.536677
31/8/13 5217.7 58.3 21.77701 20.86289 3.688453
30/9/13 5420.3 61.74 23.94198 21.79624 3.844303
31/10/13 5314.3 63.99 22.56942 21.50087 3.755246
30/11/13 5353.1 66.06 23.43381 22.06193 3.896254
31/12/13 5205.1 68.18 21.90694 21.04004 3.814618
31/1/14 5415.4 65.64 23.36837 21.51595 3.747824
28/2/14 5403 66.84 24.03729 21.20243 3.877173
31/3/14 5470.8 63.55 25.06247 21.98485 3.984024
30/4/14 5473.8 61.7 24.34993 22.31941 4.075611
31/5/14 5382 59.3 24.85111 21.53699 3.976392
30/6/14 5623.1 59.31 25.32071 22.65917 4.190094
31/7/14 5624.6 66.38 24.9182 22.29369 4.24352
31/8/14 5296.8 62.63 23.04729 22.42818 4.153627
30/9/14 5505 59.58 24.97038 23.48155 4.412249
31/10/14 5298.1 60.41 23.79267 21.65335 4.459271
30/11/14 5388.6 59.1 24.61535 21.98998 4.678707
31/12/14 5551.6 58 25.31339 22.9756 5.09407
31/1/15 5898.5 57.56 27.10834 23.1127 4.992188
28/2/15 5861.9 64.41 28.10554 23.80803 5.060349
31/3/15 5773.7 57.23 26.07279 23.67265 4.996192
30/4/15 5774.9 57.15 25.45914 23.64556 4.988173
31/5/15 5451.2 58.2 25.36044 21.13805 4.924016
30/6/15 5681.7 53.75 25.73849 22.99026 5.204701
31/7/15 5222.1 52.86 21.99743 22.02082 4.627292
31/8/15 5058.6 50.29 21.32798 22.10167 4.620785
30/9/15 5288.6 48.6 21.43036 22.20873 4.447815
31/10/15 5218.2 50.65 21.3831 21.46487 4.414868
30/11/15 5344.6 45.91 22.81056 23.44851 4.620785
31/12/15 5056.6 44.71 19.74792 23.76406 4.637259
31/1/16 4947.9 39.13 18.29418 22.02842 4.324265
29/2/16 5151.8 40.28 19.15989 24.12315 4.390159
31/3/16 5316 42.69 19.82142 24.89136 4.549177
30/4/16 5447.8 51.55 20.80963 23.64598 4.744384
31/5/16 5310.4 44.69 20.34638 23.33752 4.718923
30/6/16 5644 45.5 21.79728 24.9845 4.897155
31/7/16 5529.4 49.56 22.69144 24.69935 4.464305
31/8/16 5525.2 47.6 23.30722 26.4623 4.524136
30/9/16 5402.4 51.61 23.49281 24.60811 4.34946
31/10/16 5502.4 54.18 23.96519 25.07016 4.410597
30/11/16 5719.1 57.75 26.40722 25.28618 4.454266
31/12/16 5675 59.9 25.42628 24.15813 4.366928
31/1/17 5761 66.68 26.8239 25.63424 4.209718
28/2/17 5903.8 61.99 27.62254 27.98426 4.069976
31/3/17 5947.6 60.46 28.43854 26.69895 3.808148
30/4/17 5761.3 60.44 24.31513 26.51268 3.970581
31/5/17 5764 62.81 25.59965 24.91076 3.880341
30/6/17 5773.9 63.27 26.41078 25.28949 3.699859
31/7/17 5776.3 65.79 26.20577 26.46303 3.311826
31/8/17 5744.9 67.84 26.38404 26.71963 3.281864
30/9/17 5976.4 66.53 26.66927 27.0235 3.328882
31/10/17 6057.2 69.45 25.3679 28.39412 3.225442
30/11/17 6167.3 70.95 26.31148 28.71733 3.413514
31/12/17 6146.5 75.81 26.165 28.32299 3.451129
31/1/18 6117.3 76.85 26.59529 26.71963 3.150213
28/2/18 5868.9 81.16 24.59034 27.81488 3.017585
31/3/18 6071.6 72.7 24.57203 29.29397 3.056025
30/4/18 6123.5 79.86 24.91077 30.49197 2.69084
31/5/18 6289.7 82.97 26.60997 33.03524 2.517857
30/6/18 6366.2 83.44 27.60878 33.1021 2.72928
31/7/18 6427.8 81.2 27.79724 34.43402 2.979144
31/8/18 6325.5 72.74 26.55343 34.4696 3.139685
30/9/18 5913.3 78.76 24.4333 32.23617 3.03142
31/10/18 5749.3 76.4 25.25308 30.69307 2.883785
30/11/18 5709.4 73.28 23.74844 31.30518 2.805047
31/12/18 5937.3 78.47 24.30186 31.29546 3.060946
31/1/19 6252.7 87.05 27.18546 32.23792 3.080631
28/2/19 6261.7 96.16 25.27276 34.65 3.32
31/3/19 6418.4 97.91 26.40873 36.01 3.38
30/4/19 6491.8 95.37 27.06895 37.05 3.65
31/5/19 6699.2 100.3 28.21 36.16 3.85

Using historical prices of the Australian All Ordinaries Index (AORD) and the following four companies traded on the Australian Stock Exchange: Rio Tinto Limited (RIO.AX), ANZ Ltd (ANZ.AX), Wesfarmers Ltd (WES.AX) and Telstra Corp. (TLS.AX) provided above, answer the following questions:

1. Compute the monthly return correlation coefficients between each pair of two stocks and between each stock and the market index. which pair of stock has the highest and lowest correlation? Which stock (s) has the highest and lowest correlations with the market?

Hint: use Excel function CORREL() to compute the correlation coefficient between two data series.

1.1. Can you suggest some economic reasons to explain the high and low correlation between stocks in (1)? If you were to form a portfolio of two stocks, which ones would you choose to maximise the benefits of diversification? Give reasons for your answer.

Solutions

Expert Solution

BETWEEN
STOCKS		 Monthly return
correlation coefficients
RIO & ANZ 0.62
RIO & WES 0.76
RIO & TLS -0.69
AORD & RIO 0.78
ANZ & WES 0.60
ANZ & TLS -0.19
ANZ AORD 0.84
AORD & WES 0.89
TLS & WES -0.52
AORD & TLS -0.40

HIGHEST AND LOWEST CORRELATION BETWEEN STOCKS :

BETWEEN
STOCKS		 Monthly return
correlation coefficients
RIO & ANZ 0.62
RIO & WES 0.76
RIO & TLS -0.69
ANZ & WES 0.60
ANZ & TLS -0.19
TLS & WES -0.52

HIGHEST CORRELATION IS BETWEEN RIO & WES stocks i.e 0.76 & lowest correlation is between RIO & TLS stocks i.e -0.69.
BETWEEN INDEX
& STOCK		 correlation
coefficients
AORD & RIO 0.78
ANZ & AORD 0.84
AORD & WES 0.89
AORD & TLS -0.40
HIGHEST CORRELATION IS BETWEEN Index AORD is with WES stock i.e 0.89 & lowest correlation is between AORD & TTLS stock i.e -0.40.

jeff jeffy answered 3 weeks ago
Next > < Previous

Related Solutions

^AORD RIO ANZ WES TLS Date Adj Close Adj Close Adj Close Adj Close Adj Close...
^AORD RIO ANZ WES TLS Date Adj Close Adj Close Adj Close Adj Close Adj Close 31/1/13 5120.4 66.36 19.84806 19.57102 3.212754 28/2/13 4979.9 67.05 19.71675 19.69255 3.255187 31/3/13 5168.6 57.2 22.00425 21.24546 3.594419 30/4/13 4914 55.8 19.03257 19.22232 3.421195 31/5/13 4775.4 55.18 20.2205 19.39867 3.442847 30/6/13 5035.7 52.37 21.05536 19.86891 3.601637 31/7/13 5125.3 57.51 21.00583 19.91794 3.536677 31/8/13 5217.7 58.3 21.77701 20.86289 3.688453 30/9/13 5420.3 61.74 23.94198 21.79624 3.844303 31/10/13 5314.3 63.99 22.56942 21.50087 3.755246 30/11/13 5353.1 66.06 23.43381...
This is a 2-year timeline of Microsoft's stock prices: Date Open High Low Close Adj Close...
This is a 2-year timeline of Microsoft's stock prices: Date Open High Low Close Adj Close Volume 1/1/16 null null null null null null 2/1/16 54.880001 55.09 48.189999 50.880001 48.439545 813425300 3/1/16 50.970001 55.639999 50.580002 55.23 52.958412 640548300 4/1/16 55.049999 56.77 49.349998 49.869999 47.818874 697861300 5/1/16 50 53 49.459999 53 50.820141 530284000 6/1/16 52.439999 52.950001 48.040001 51.169998 49.408588 823351500 7/1/16 51.130001 57.290001 50.389999 56.68 54.728916 647351200 8/1/16 56.599998 58.700001 56.139999 57.459999 55.482067 466729800 9/1/16 57.009998 58.189999 55.610001 57.599998 55.96389 526196300...
Date Open High Low Close Adj Close Volume Rate of return 1/1/2014 1845.859985 1850.839966 1770.449951 1782.589966...
Date Open High Low Close Adj Close Volume Rate of return 1/1/2014 1845.859985 1850.839966 1770.449951 1782.589966 1782.589966 75871910000 2/1/2014 1782.680054 1867.920044 1737.920044 1859.449951 1859.449951 69725590000 0.04311703 3/1/2014 1857.680054 1883.969971 1834.439941 1872.339966 1872.339966 71885030000 0.006932166 4/1/2014 1873.959961 1897.280029 1814.359985 1883.949951 1883.949951 71595810000 0.006200789 5/1/2014 1884.390015 1924.030029 1859.790039 1923.569946 1923.569946 63623630000 0.02103028 6/1/2014 1923.869995 1968.170044 1915.97998 1960.22998 1960.22998 63283380000 0.019058332 7/1/2014 1962.290039 1991.390015 1930.670044 1930.670044 1930.670044 66524690000 -0.015079831 8/1/2014 1929.800049 2005.040039 1904.780029 2003.369995 2003.369995 58131140000 0.037655295 9/1/2014 2004.069946 2019.26001 1964.040039 1972.290039 1972.290039...
The table below is the Monthly return Correlation Coefficients between two stocks: RIO & ANZ 0.6162...
The table below is the Monthly return Correlation Coefficients between two stocks: RIO & ANZ 0.6162 RIO & WES 0.7593 RIO & TLS -0.6850 ANZ & WES 0.5970 ANZ & TLS -0.1865 WES & TLS -0.5192 Required: a. Which pair of two stocks have the highest and lowest correlations? b. Suggest some economic reasons to explain the high and low correlation between these stocks. If you were to form a portfolio of two stocks, which ones would you choose to...
Disney Annual Historical Prices Date Open High Low Adj. Close 10/1/2005 23.80 24.65 22.57 20.21 10/1/2006...
Disney Annual Historical Prices Date Open High Low Adj. Close 10/1/2005 23.80 24.65 22.57 20.21 10/1/2006 30.36 31.55 29.98 26.37 10/1/2007 34.38 35.69 33.57 30.13 10/1/2008 30.30 31.06 21.25 22.78 10/1/2009 27.76 29.98 26.84 24.43 10/1/2010 33.30 36.52 33.08 32.62 10/1/2011 30.03 36.60 28.19 31.84 10/1/2012 52.31 53.15 48.80 45.59 10/1/2013 64.37 69.87 63.10 64.63 10/1/2014 89.08 91.98 78.54 87.17 10/1/2015 102.97 115.40 99.88 110.52 10/1/2016 92.47 94.40 90.32 91.30 10/1/2017 99.31 100.98 96.80 97.81 Comparing the first six years...
Make sure to use the "Close" column not the adjusted close on the date of the...
Make sure to use the "Close" column not the adjusted close on the date of the relevant financial statement. How do you calculate these ratios with Income Statement, Balance sheet, and Cash Flows? a. Price/Earnings b. Enterprise Value / EBITDA c. Market to Book Equity Ratio d. Enterprise Value / Book Assets e. Total Asset Turnover f. Receivables Turnover g. Average Collection Period h. Profit Margin f. Equity Multiplier g. Return on Assets h. Return on Equity
1. The Stock Price details of TATA TELESERVICES (MAHARASHTRA) LTD. are given below Date Close Date                    ...
1. The Stock Price details of TATA TELESERVICES (MAHARASHTRA) LTD. are given below Date Close Date                     Close          No. of Shares    No of Trades     Total Turnover res es 01-03-2019          3.09                69,242               100                   2, 14,257 05-03-2019           3.35              1, 97,344              251                   6, 51,621 06-03-2019           3.41              1, 58,205              160                   5, 47,942 07-03-2019           3.55              4, 00,183              433                 13, 99,537 08-03-2019           3.49              2, 73,890              503                   9, 42,944 11-03-2019             3.5              1, 46,178              145                   5, 12,714 12-03-2019           3.52                 80,672              109                    2, 83,868 13-03-2019           3.46              1, 49,428              116                   5,...
Calculate the return for June 21st based on the data below: Date Open High Low Close...
Calculate the return for June 21st based on the data below: Date Open High Low Close Dividend 20-Jun 13.2 15.4 12.8 14 21-Jun 13.3 15.8 12.2 15 0.6 22-Jun 14.8 17.5 14.5 16 34.43% 17.29% 11.43% 7.14%
analyses and explain amazon stock price in July date close volume open high low change in...
analyses and explain amazon stock price in July date close volume open high low change in price 7/1/19 1922.19 3203347 1922.98 1929.82 1914.66 28.56 7/2/19 1934.31 2651299 1919.38 1934.79 1906.63 12.12 7/3/19 1939 1690294 1935.89 1941.59 1930.5 4.69 7/5/19 1942.91 2628359 1928.6 1945.9 1925.3 3.91 7/8/19 1952.32 2883371 1934.12 1956 1928.2532 9.41 7/9/19 1988.3 4345698 1947.8 1990.01 1943.475 35.98 7/10/19 2017.41 4931902 1996.51 2024.94 1995.4 29.11 7/11/19 2001.07 4317766 2025.62 2035.8 1995.3 -16.34 7/12/19 2011 2509297 2008.27 2017 2003.87 9.93...
analyses and explain amazon stock price in June date close volume open high low change in...
analyses and explain amazon stock price in June date close volume open high low change in price 6/3/19 1692.69 9098708 1760.01 1766.29 1672 6/4/19 1729.56 5679121 1699.24 1730.82 1680.89 36.87 6/5/19 1738.5 4239782 1749.6 1752 1715.2514 8.94 6/6/19 1754.36 3689272 1737.71 1760 1726.13 15.86 6/7/19 1804.03 4808246 1763.7 1806.2538 1759.49 49.67 6/10/19 1860.63 5371007 1822 1884.87 1818 56.60 6/11/19 1863.7 4042694 1883.25 1893.7 1858 3.07 6/12/19 1855.32 2678335 1853.98 1865 1844.38 -8.38 6/13/19 1870.3 2795810 1866.72 1883.09 1862.22 14.98 6/14/19...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT