Dhruv Malhotra Assignment 3
Dhruv Malhotra Assignment 3
Dhruv Malhotra Assignment 3
Rf 6.79%
Rf + Beta(Rm-
CAPM Model Rf)
Coefficient of VarianceCo Variance Beta CAPM Model
23.9387198933551 0.007% 0.60 11%
48.0461482936868 0.006% 0.48 10%
-252.986302718564 0.007% 0.54 10%
48.3926911723893 0.014% 1.15 14%
18.2711785649215 0.007% 0.53 10%
Infosys
Wipro
Coal
Tata Motors
Nestle
Expected
Portfolio Portfolio
Annualized retur Difference Weights return Variance
18.15% 7.50% 0.13 11% 0.02%
9.23% -0.67% 0.07
-1.95% -12.21% 0.3
15.14% 0.88% 0.25
20.53% 10.31% 0.25
1
Correlation Matrix
Infosys Wipro Coal Tata Motors Nestle
1
0.4641840863846 1
0.1448836022857 0.2169481902 1
0.2316097080216 0.246520863 0.3250308767 1
0.2002572729316 0.1819539647 0.1509756216 0.13748771356 1
Portfolio
risk
1.33%
Beta (Risk relative to the market)
Infosys (Beta: 0.60): This indicates Infosys has a lower risk compared to the overall market
Wipro (Beta: 0.48): Wipro’s beta is also below 1, indicating it is less risky than the market. I
Coal (Beta: 0.54): Coal also has a beta below 1, indicating it is less risky than the market, b
Tata Motors (Beta: 1.15): Tata Motors has a beta above 1, indicating it is riskier than the m
Nestle (Beta: 0.53): Nestle has a beta slightly below 1, indicating it is also less risky than th
Portfolio Risk
Expected Return: Based on the CAPM model, Infosys and Tata Motors offer the highest expe
Portfolio Weights: The weightings in the portfolio are essential for calculating overall risk. F
Portfolio Variance and Risk: You can compute the portfolio risk using the covariance matri
mpared to the overall market. Its beta suggests that the stock is less volatile than the market. For ever
s less risky than the market. It has the lowest beta among these stocks, meaning it will be less reactive
less risky than the market, but slightly more volatile than Infosys and Wipro.
icating it is riskier than the market. It moves more than the market by 15%, suggesting higher volatilit
ng it is also less risky than the market. It will move less in response to market changes.
Motors offer the highest expected returns of 11% and 14%, respectively. Nestle has an expected retur
for calculating overall risk. For example, Nestle and Tata Motors are heavily weighted (0.25 each), wh
sk using the covariance matrix provided, taking into account the weights of each security and their res
tile than the market. For every 1% change in the market, Infosys moves by 0.6%.
arket changes.
vily weighted (0.25 each), which might increase overall risk due to Tata Motors' high beta (1.15).