Question 40 The Table below shows the returns for three stocks, and portfolios of Pairs of Stocks Stock ReturnsPortfolio ReturnsYearNorth AirWest AirTex Oil1/2RN + 1/2W1/2RW + 1/2T201021%9%-2%15.0%3.5%201130%21%-5%25.5%8.0%20127%7%9%7.0%8.0%2013-5%-2%21%-3.5%9.5%2014-2%-5%30%-3.5%12.5%20159%30%7%19.5%18.5%Average Return10.0%10.0%10.0%10.0%10.0%Volatility13.4%13.4%13.4%21.1%5.1% Required:1. From the three stocks in the above table, comment on the volatility and average return, and the pattern of the returns 2. Which portfolio (combination of stocks), eliminated the highest risk? And what could be the plausible reason for that? 3. Compute the covariance and correlation between pairs of stocks (North Air & West Air ; and West Air and Text oil)

Name: Question 40 The Table below shows the returns for three stocks, and po
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Description: Question 40 The Table below shows the returns for three stocks, and portfolios of Pairs of Stocks Stock ReturnsPortfolio ReturnsYearNorth AirWest AirTex Oil1/2RN + 1/2W1/2RW + 1/2T201021%9%-2%15.0%3.5%201130%21%-5%25.5%8.0%20127%7%9%7.0%8.0%2013-5%-2

Volatility is called standard deviation, For North air, west air and tex oil volatilities are equal…

Answered: The Table below shows the returns for…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Question 40

The Table below shows the returns for three stocks, and portfolios of Pairs of Stocks

	Stock Returns	Portfolio Returns
Year	North Air	West Air	Tex Oil	1/2R_N+ 1/2_W	1/2R_W+ 1/2_T
2010	21%	9%	-2%	15.0%	3.5%
2011	30%	21%	-5%	25.5%	8.0%
2012	7%	7%	9%	7.0%	8.0%
2013	-5%	-2%	21%	-3.5%	9.5%
2014	-2%	-5%	30%	-3.5%	12.5%
2015	9%	30%	7%	19.5%	18.5%
Average Return	10.0%	10.0%	10.0%	10.0%	10.0%
Volatility	13.4%	13.4%	13.4%	21.1%	5.1%

Required:

1. From the three stocks in the above table, comment on the volatility and average return, and the pattern of the returns

2. Which portfolio (combination of stocks), eliminated the highest risk? And what could be the plausible reason for that?

3. Compute the covariance and correlation between pairs of stocks (North Air & West Air ; and West Air and Text oil)

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