$5.$ Measuring standalone risk using realized data

Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock.

Consider the case of Celestial Crane Cosmetics Inc. $($CCC$)$:

Five years of realized returns for CCC are given in the following table. Remember:

$1.$ While CCC was started $40$ years ago, its common stock has been publicly traded for the past $25$ years.

$2.$ The returns on its equity are calculated as arithmetic returns.

$3.$ The historical returns for CCC for $2012$ to $2015$ are:

$2012$

$2013$

$2014$

$2015$

$2016$

Stock return $23\mathrm{.}75\%16\mathrm{.}15\%28\mathrm{.}50\%39\mathrm{.}90\%12\mathrm{.}35\%$

Given the preceding data, the average realized return on CCC$$s stock is $.$

The preceding data series represents of CCC$$s historical returns. Based on this conclusion, the standard deviation of CCC$$s historical returns is $.$

If investors expect the average realized return from $2012$ to $2016$ on CCC$$s stock to continue into the future, its coefficient of variation $($CV$)$ will be $.$