The actual returns of company A for the past three months were 15%, 25%, -5% and...

The actual returns of company A for the past three months were 15%, 25%, -5% and that of company B were 18%, 24% and -1%.. In case of portfolio, there will be equal investment a) Calculate the expected standard deviation of company B b) Find the correlation coefficient between the rates of return c) Find the expected portfolio return if you invest equally in the two companies d) Find the weighted standard deviation of the portfolio e) Find the standard deviation of the portfolio using the correlation coefficient found in (b) f) At what correlation coefficient is the maximum risk reduction obtained from diversification? g) Calculate the expected return of company B using geometric average

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Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago

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