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Strategic Finance Assignment 2 (Solution)

1) The document calculates the covariance between the returns of stocks K and MAXR over a period from January 2018 to December 2019 using daily pricing data. 2) It finds the covariance to be 0.00340, indicating a low positive correlation between the stock returns. 3) It also calculates the risk of stock K over this period to be -2%, while the risk of stock MAXR over the same period is 6%, as measured by the coefficient of variation.

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Zahid Usman
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61 views3 pages

Strategic Finance Assignment 2 (Solution)

1) The document calculates the covariance between the returns of stocks K and MAXR over a period from January 2018 to December 2019 using daily pricing data. 2) It finds the covariance to be 0.00340, indicating a low positive correlation between the stock returns. 3) It also calculates the risk of stock K over this period to be -2%, while the risk of stock MAXR over the same period is 6%, as measured by the coefficient of variation.

Uploaded by

Zahid Usman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Strategic Finance

Assignment no 2 (Solution)
CMS: 28127
Submitted To: Dr. Irum Naz K
Submitted By: Zahid Usman
Date Price Return Ri-R^
18-Jan 68.11 - -
18-Feb 66.2 -0.02804 -0.02876
MAXR Historical Data
18-Mar 65.01 -0.01798 -0.0187
Date Price Return Ri-R^ (Ri-R^)2 18-Apr 58.9 -0.09399 -0.09471
18-Jan 77.62 - - - 18-May 64.39 0.093209 0.092488
18-Feb 60.13 -0.22533 -0.2024 0.040965 18-Jun 69.87 0.085106 0.084385
18-Mar 59.58 -0.00915 0.013784 0.00019 18-Jul 71.03 0.016602 0.015881
18-Apr 58.1 -0.02484 -0.00191 3.65E-06 18-Aug 71.79 0.0107 0.009979
18-May 62 0.067126 0.090056 0.00811 18-Sep 70.02 -0.02466 -0.02538
18-Jun 66 0.064516 0.087446 0.007647 18-Oct 65.48 -0.06484 -0.06556
18-Jul 63.75 -0.03409 -0.01116 0.000125 18-Nov 63.65 -0.02795 -0.02867
18-Aug 40.45 -0.36549 -0.34256 0.117347 18-Dec 57.01 -0.10432 -0.10504
18-Sep 42.54 0.051669 0.074599 0.005565 19-Jan 59.01 0.035082 0.034361
18-Oct 19.68 -0.53738 -0.51445 0.264655 19-Feb 56.26 -0.0466 -0.04732
18-Nov 21.99 0.117378 0.140308 0.019686 19-Mar 57.38 0.019908 0.019187
18-Dec 16.31 -0.2583 -0.23537 0.055399 19-Apr 60.3 0.050889 0.050168
19-Jan 7.38 -0.54752 -0.52459 0.275191 19-May 52.56 -0.12836 -0.12908
19-Feb 9.6 0.300813 0.323743 0.10481 19-Jun 53.57 0.019216 0.018495
19-Mar 5.4 -0.4375 -0.41457 0.171868 19-Jul 58.22 0.086802 0.086081
19-Apr 6.59 0.22037 0.243301 0.059195 19-Aug 62.8 0.078667 0.077946
19-May 9.12 0.383915 0.406845 0.165523 19-Sep 64.35 0.024682 0.02396
19-Jun 10.3 0.129386 0.152316 0.0232 19-Oct 63.53 -0.01274 -0.01346
19-Jul 9.72 -0.05631 -0.03338 0.001114 19-Nov 65.12 0.025028 0.024307
19-Aug 9.38 -0.03498 -0.01205 0.000145 19-Dec 66.48 0.020885 0.020163
19-Sep 10.06 0.072495 0.095425 0.009106
19-Oct 11.17 0.110338 0.133268 0.01776 0.017305
19-Nov 14.15 0.266786 0.289716 0.083936 P 24
19-Dec 16.92 0.19576 0.21869 0.047825 24

-0.55033 1.479366 0.000721


P 24 24 0.072104
24 24 Return 0% Risk
C.V
-0.02293 0.06164
-2.29304 6.164027
Return -2% Risk 6%
C.V -0.10827
1) Calculation of Covariance
K & MAXR

(Ri-R^)2 (x-x(bar))(y-y(bar)) Covariance=


- Covariance/P
0.000827 0.005821763
0.00035 -0.000257708 2) RISK
0.008969 0.000180908
0.008554 0.00832908
0.007121 0.007379202
0.000252 -0.000177243 3) Return
9.96E-05 -0.00341829
0.000644 -0.001893047
0.004298 0.033726918
0.000822 -0.004022432
0.011034 0.024723509
0.001181 -0.018025068
0.002239 -0.015320607
0.000368 -0.007954154
0.002517 0.012205855
0.016661 -0.052515295
0.000342 0.002817105
0.00741 -0.002873421
0.006076 -0.000939178
0.000574 0.00228643
0.000181 -0.001794305
0.000591 0.007041994
0.000407 0.004409553

0.081517 -0.000268432
24
24

0.003397
0.339656
0%
-0.10827
E(x-x(bar))(y-y(bar))/N
0

= 0
= 0

= 0

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