Please provide step for all equatioins Go to finance.yahoo.com , and find the monthly rates of return
Question:
Please provide step for all equatioins
Go to finance.yahoo.com , and find the monthly rates of return over a 2-year period for five
companies of your choice. Now assume you form each month an equally weighted portfolio of
the five firms (i.e., a portfolio with equal investments in each firm). What is the rate of return
each month on your portfolio? Compare the standard deviation of the monthly portfolio return
to that of each firm and to the average standard deviation across the five firms. What do you
conclude about portfolio diversification?
2. Return to the monthly returns of the five companies you chose in the previous question.
a. Using the Excel functions for average (AVERAGE) and sample standard deviation (STDEV),
calculate the average and the standard deviation of the returns for each of the firms.
b. Using Excels correlation function (CORREL), find the correlations between each pair of
five stocks. What are the highest and lowest correlations?
c. Try finding correlations between pairs of stocks in the same industry. Are the correlations
higher than those you found in part (b)? Is this surprising?