Firms: AYGAZ and BAGFS

Take the monthly returns as your starting point (between 01.01.2020 and 04.11.2023)

Prepare five different portfolios with the inclusion of two stocks in your portfolio:

Example:

• Portfolio 1: 80% of stock A and 20% of stock B;
• Portfolio 2: 60% of stock A and 40% of stock B;
• Portfolio 3: 50% of stock A and 50% of stock B;
• Portfolio 4: 40% of stock A and 60% of stock B;
• Portfolio 5: 20% of stock A and 80% of stock B
  1. Find the monthly returns for these five portfolios.

1. Find the average of these monthly returns for the five portfolios.
2. Find the standard deviation for the monthly returns of each stock separately.
3. Find the correlation between two stocks
4. Find the standard deviation of these portfolios
5. What can you say about the standard deviation of individual stocks, and the standard deviation of the portfolios that you have constructed?
6. What can you say about the risk return profile of the portfolios that you have made? Please write your comments.