This assessment is primarily on applied portfolio diversification using real data sets from stock markets. You are required to download the last three to five years of daily time series of stock prices data for two UK-listed companies from preferably diverse and less-correlated industries. The risk-free asset is assumed with an annual rate of return of 3%. 1. Provide rationale for selection of your stocks with special reference to their respective industries, size. market share, market capitalization and other relevant company-specific characteristics. (10 marks) 2. Provide a graphical representation of daily time series data and calculate the key summary statistics for each company with a brief comparison. Calculate the expected annual return on each company using the annualized returns and the Single-Index Model (30 marks) 3. Calculate the optimum investment weights for each company providing the mean-variance efficient portfolio and graphically present the combination of risk-return characteristics of portfolios with different weights in each company, ie, the efficient frontier. Briefly interpret your applied findings. (30 marks) 4. Calculate the performance measurement metrics in terms of the Jensen's alpha, Sharpe ratio ad Treynor ratio for each company and the mean-variance efficient portfolio; and explain in which company or the portfolio investors should invest, and why: with special reference to each performance criterion. (30 marks) TOTAL [100 MARKS] What do I need to do to pass? (Threshold Expectations from UIF) In order to pass Assessment 2 you will need to: Use real world cases and financial data to demonstrate the ability to solve the complicated problem of generating optimal portfolios that achieve both a reduced risk and a required return Demonstrate a clear application of your skids to the contemporary financial environment and make sound and informed judgments and decisions. Collect data of financial assets from Reuters Eikon or Datastream (or other sources) and critically evaluate the performance of financial assets based on financial analysis and statistical techniques, explaining the implication of these variables How do I produce high quality work that merits a good grade? Develop a consistent and logical argument that shows deep analysis and clarity of thought. It could be based on an excellent grasp of financial markets and portfolio management eg liquidity, risk management, investment decisions, interest rates Develop and present a good synthesis of relevant theoretical analyses and examples