An investment portfolio has 45% invested in stock A and 55% invested in stock B. The standard deviations of A and B are 12% and 17%, respectively, and the portfolio’s standard deviation is 14%. What is the correlation coefficient between the two stocks?
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An investment portfolio has 45% invested in stock A and 55% invested in stock B. The standard deviations of A and B are 12% and 17%, respectively, and the portfolio’s standard deviation is 14%. What is the correlation coefficient between the two stocks?
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- A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the correlation coefficient between Stock X and Stock Y? Select one: a. 0.60 b. 0.50 c. 1.00 d. 0.00 e. 0.40From the following information, calculate covariance between stocks A and B and expected return and risk of a portfolio in which A and B are equally weighted.Which stock would be recommend if investment in individual stock is to be made? Justify answer using numerical calculations. Stock A Stock B Expected return 24% 35% Standard deviation 12% 18% Coefficient of correlation 0.65 0.65From the following information, calculate covariance between stocks A and B and expected return and risk of a portfolio in which A and B are equally weighted.Which stock would be best recommend if investment in individual stock is to be made? Justify the answer using numerical calculations. Stock A Stock B Expected return 24% 35% Standard deviation 12% 18% Coefficient of correlation 0.65
- 2. (a) You have a two-asset portfolio that comprises Stock PY and Stock NY with the following information: Proportion of Stock PY in the portfolio Proportion of Stock NY in the portfolio Standard deviation of Stock PY's returns Standard deviation of Stock NY's returns 48% 52% 3% 5% Calculate the standard deviation if the correlation coefficient of returns between both stocks is 0.15.Suppose that the capital asset pricing model (CAPM) applies. The risk premium of a stock is 3 percent and the risk premium of the market portfolio is 2. The standard deviation of the market portfo- lio is 6. Compute the covariance between the stock and the market portfolio.PLEASE EXPLAIN HOW ANSWERS WERE FOUND Using the data in the following table,calculate the volatility (standard deviation) of a portfolio that 54% is invested in stock A and 46% in stock B.
- Suppose that the average stock has a volatility of 57%, and that the correlation between pairs of stocks is 18%. Estimate the volatility of an equally weighted portfolio with: a. 1 stock b. 30 stocks c. 1,000 stocksSuppose each stock in Andre’s portfolio has a correlation coefficient of 0.4 (ρ = 0.4) with each of the other stocks. If the weighted average of the risk of the individual securities (as measured by their standard deviations) included in the partially diversified four-stock portfolio is 35%, the portfolio’s standard deviation (σpσp) most likely is 35%.If a given stock in the portfolio had established 1.23 beta; the related expected return is at 11.7percent, and 3.5percent is the current earning of a risk-free asset; a. Determine the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of 0.7, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9%, what is its beta? d. If a portfolio of the two assets has a beta of 2.46, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Discuss.
- Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is 75% invested in stock A and 25% in stock B.The correlation coefficient between stock B and the market portfolio is 0.8. The standard deviation of stock B is 24 percent and the standard deviation of the market is 30 percent. Calculate the beta of the stock. 0.64 0.92 0.80 1.00 1.42Assume that the covariance between Stock A and Stock B is -28%^2 (0.0028). Compute the expected rate of return and variance of rate of return of Donald’s portfolio.