Question
Question 1 Mr. Morris had $100,000 in his account. Using this fund, he made a portfolio of two NYSE listed stocks Johnson and Johnson (J&J)
Question 1 Mr. Morris had $100,000 in his account. Using this fund, he made a portfolio of two NYSE listed stocks Johnson and Johnson (J&J) and IBM on 01 Jan 2019 in the ratio of 60:40, i.e. 60% funds in J&J & 40% funds in IBM. The daily stock data of both stocks can be found on market websites such as finance.yahoo.com. Download daily data for 1 year from 1 Jan 2019 1 st Jan 2020. Using the stock data of the two stocks, you are required to explain the below concepts and then compute for the given stocks: a. Annual return of both J&J and IBM. b. Annualized standard deviation of returns of both J&J and IBM. c. Correlation coefficient of returns of J&J and IBM. What does this correlation coefficient signify about the correlation of the two stocks and corresponding decision from an investor? d. Portfolio return of the portfolio of two stocks. e. Portfolio risk (standard deviation) of the portfolio of two stocks. f. Critically analyze your investment decision in these two companies. Given an option, would you like to invest in any other company? Or would you like to have a different ratio of investment in the two?
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