Quantity And Portfolio Returns From Benchmark Index

1169 Words May 4th, 2015 5 Pages
Part B:
Both excess and portfolio returns were calculated in the previous section. Subtraction of the portfolio returns from the ASX 200 benchmark returns yields the tracking error figures. Correlation figure for portfolio against ASX 200 benchmark was 0.4568 or 45.68%.

The correlation coefficient interval is limited to integer values of both negative and positive one. Assets can be perfectly correlated at both extremes, (Brailsford, Heaney & Bilson, 2011, p. 25). All four asset class correlation figures (A-REITS, infrastructure funds, domestic and international ETFs) measured against ASX 200 benchmark will be looked at in detail.

Three of the four asset classes measured against the ASX 200 benchmark had positive correlations. Domestic exchange traded funds (Vanguard Australian Share Index) had the highest correlation level amounting to 0.6611 or 66.11%. Infrastructure funds (Transurban Limited) had a correlation figure of 0.2683 or 26.83%. Finally, A-REITS (ALE Property) had a correlation of 0.1832 or 18.32%. All three asset classes demonstrate positive returns, (Brailsford, Heaney & Bilson, 2011, p. 25). Exchange traded funds aim to match minimum domestic and international returns. Fund managers generally select investment portfolios on behalf of clients. Careful choice in the selection of investment portfolios could explain the positive correlation in this particular asset class, (Brailsford, Heaney & Bilson, 2011, p. 87). A negative correlation was discovered with…
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