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Please show the work. The question is in the document. You are looking to invest your money in Stock ABC and Stock XYZ. Their historical
Please show the work. The question is in the document.
You are looking to invest your money in Stock ABC and Stock XYZ. Their historical returns for the past 6 years are found in the following table. ABC X YZ 2011 -14.11% -5.53% 2012 10.35% 23.94% 2013 -3.60% 24.55% 2014 -20.47% 52.72% 2015 7.34% -12.39% 2016 21.94% -10.33% a) What is the sample standard deviation and average return (arithmetic mean) for each stock? What is the correlation of returns (correlation coefficient)? b) You are thinking of investing in a portfolio containing these 2 stocks. Calculate the return and standard deviation of returns if you held these portfolios for the past 6 years with the following weightings. Portfolio 1 ABC 80% XYZ 20% Portfolio 2 ABC 50% XYZ 50% c) Which Portfolio would you prefer and why
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