Question
Compute the correlation coefficients between all pairs of stock returns. Suppose an investor already has a stake in Citigroup (C) and would like to add
Compute the correlation coefficients between all pairs of stock returns. Suppose an investor already has a stake in Citigroup (C) and would like to add another asset to her portfolio. Which of the remaining three assets will give her the maximum benefit of diversification? (Hint: Find the asset with the lowest correlation with Citigroup (C)). Using the table below:
| Date | RET_MON | RET_FB | RET_TSLA | RET_C | RET_CWST |
| 10/1/2015 | 9.233658935 | 13.42602751 | -16.69484783 | 7.175966394 | 4.655172414 |
| 11/1/2015 | 2.710792104 | 2.226141981 | 11.27434533 | 1.730302867 | 11.69686985 |
| 12/1/2015 | 3.530900863 | 0.4029221106 | 4.234343877 | -4.326123128 | -11.79941003 |
| 1/1/2016 | -8.038980816 | 7.213830223 | -20.33665223 | -17.7198029 | -0.5016722408 |
| 2/1/2016 | -0.1188613662 | -4.714375766 | 0.3817970771 | -8.759990194 | -0.3361344538 |
| 3/1/2016 | -2.500265395 | 6.715301285 | 19.71552773 | 7.464612997 | 12.98482293 |
| 4/1/2016 | 6.770007367 | 3.049959738 | 4.783039913 | 10.85029701 | 6.865671642 |
| 5/1/2016 | 20.81060816 | 1.046092855 | -7.281109555 | 0.6266227447 | 0.2793296089 |
| 6/1/2016 | -8.055473123 | -3.812809592 | -4.905253414 | -8.975737599 | 9.331476323 |
| 7/1/2016 | 3.24919984 | 8.452925345 | 10.60391658 | 3.349851459 | 19.23566879 |
| 8/1/2016 | 0.2873178192 | 1.758916383 | -9.702286588 | 8.970556746 | -2.884615385 |
| 9/1/2016 | -4.037559306 | 1.70472641 | -3.7639716 | -1.068290697 | 13.31133113 |
| 10/1/2016 | -1.399230964 | 2.120527727 | -3.087782694 | 4.065217023 | 8.737864078 |
| 11/1/2016 | 2.466863728 | -9.596157356 | -4.212816552 | 14.73041039 | 13.03571429 |
| 12/1/2016 | 2.434039572 | -2.8457989 | 12.82471424 | 5.391028647 | -1.974723539 |
| 1/1/2017 | 2.946492142 | 13.27249335 | 17.89507728 | -6.057543328 | -6.849315068 |
| 2/1/2017 | 5.638161494 | 4.005513904 | -0.7700504322 | 7.128781761 | 1.038062284 |
| 3/1/2017 | -0.5534573702 | 4.803017807 | 11.32444595 | 0.01671793986 | 20.80479452 |
| 4/1/2017 | 3.012365158 | 5.772613042 | 12.85304367 | -1.17017887 | 6.661941885 |
| 5/1/2017 | 1.170725946 | 0.8053291181 | 8.577706371 | 2.401897876 | -6.843853821 |
| 6/1/2017 | 0.8005469127 | -0.3169226052 | 6.040871058 | 10.47240815 | 17.04707561 |
| 7/1/2017 | -1.30112003 | 12.10094349 | -10.5472707 | 2.347488144 | 2.254728824 |
| 8/1/2017 | 0.7849496696 | 1.607090694 | 10.02565706 | -0.6135836646 | 0.1787723374 |
| 9/1/2017 | 1.911267114 | 0.1162976094 | 5.060413123 | 5.041893356 | 4.402141844 |
| a. | Facebook (FB) | |
| b. | Monsanto (MON) | |
| c. | Tesla (TSLA) | |
| d. | Casella Waste Systems (CWST) | |
| e. | None of the above |
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Financial Intelligence
Authors: Income Mastery
1st Edition
1647773210, 978-1647773212
