Question
Obtain monthly adjusted close prices of Microsoft (symbol: MSFT) and Dow Chemical (symbol: DOW) during December 1989 December 2019 from Yahoo Finance. Using Excel, compute
Obtain monthly adjusted close prices of Microsoft (symbol: MSFT) and Dow Chemical (symbol: DOW) during December 1989 December 2019 from Yahoo Finance. Using Excel, compute monthly returns of each company during January 1990 December 2019. Also, compute and report the arithmetic average and the standard deviation of each companys returns. Compute and report the correlation coefficient between these two stock returns. Next, form a portfolio that combines Microsoft and Dow Chemical with equal weight. Compute monthly returns on this newly formed portfolio. Also, compute and report the arithmetic average and the standard deviation of this portfolios returns. Is the portfolio standard deviation smaller than the weighted average of individual standard deviations? Also, compute and report the standard deviation of this portfolios returns using the equation that we learned in class. Were you able to obtain the same answer?
Guidelines:
1. Use the STDEV.P( : ) command to compute standard deviation.
2. Use the CORREL( : , : ) command to compute correlation coefficient.
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