6. (Finding the dominating portfolio and the minimum variance portfolio Consider the following statistics for a portfolio composed of shares on Companies A and B : DET Company A stock 25% 0.0800 28 29% Average return 3 Variance Sigma 5 I covariance of returns Correlation of returns Company B stock 48% 0.1600 40.00% 0.00350 0.03094 =B6/B4C4) Portfolio 10 Proportion of A T1 Proportion of B 12 Portfolio average return 13 Portfolio standard deviation 0.9 0.1 27.30% C 25.89% B10-B2-C2-B11 - SORT(B10'233.31142"C3.2"B10 B11B6) a. Suggest a portfolio combination that improves return while main taining the same level of risk. b. Calculate the minimum variance portfolio for the portfolio com- posed of the two assets described above. 7. (Statistics of two stocks, regression. Consider the returns for Ford and MSFT stocks given below: A B C FORD AND MSFT RETURN STATISTICS, 2005-2014 FORD MSFT Date return return 31-Dec-05 112.92% -0.93% 31-Dec-06 -52.92% 15.82% 31-Dec-07 -43.44% 20.85% 31-Dec-08 -5.91% -44.37% 31-Dec-09 -5.83% 60.40% 31-Dec-10 53.33% -6.52% 31-Dec-11 -48.14% -4.52% 31-Dec-12 -11.38% 5.83% 31-Dec-13 4.73% 44.29% 31-Dec-14 -32.90% 27.54% 10 11 12 a. Calculate the mean return and the standard deviation of each stock. Also calculate the correlation coefficient between the two stocks. b. Show a regression that describes the relationship between the returns of the two stocks. c. How would you construct a portfolio from those two stocks that yields 8% mean return