Two stocks portfolio Suppose that we have two stocks whose prices we have recorded over 12 months and then Task 1: Compute the continuously compounded return of each A Month Return 0 2 3 4 5 B Stock A Price 25.00 24.12 23.37 24.75 26.62 26.50 28.00 28.88 29.75 31.38 36.25 37.13 36.88 E F Stock B Price Return 45.00 44.85 46.88 45.25 50.87 53.25 53.25 62.75 65.50 66.87 78.50 78.00 68.23 6 7 8 9 10 11 12 Task 2: compute the mean return, volatility, standard deviation of the two stocks, and their covariance and correlation: Stock A Stock B Monthly mean Monthly variance Monthly stand. dev. Annual mean Annual variance Annual stand, dev. Portfolio Theory (Feasible or Opportunity sets) |Practical Exercise Task3: Create the 10 opportunity (feasible) sets based on predetermined weights of each stock. It can be negative or positive weights. Negative weight implies short position and Positive weight implies long position. Draw a graph of these feasible sets