田 Year Fosun China Petroleum & Chemical Commonwealth (HKG: 2196) (HKG: 386) (ASX: CBA) 2013 11.62 7.24 64.10 2014 23.85 6.18 73.83 2015 28.05 6.13 88.85 2016 18.54 4.33 78.67 2017 25.9 6.21 81.66 2018 45.45 6.76 78.87 2019 23.85 6.57 69.91 2020 20.9 4.13 85.26
Risk and return
You are considering an investment in the stock market and have identified three potential stocks, they are Shanghai Fosun Pharmaceutical Group (HKG: 2196), China Petroleum & Chemical Corporation (HKG: 386) and Commonwealth Bank (ASX: CBA). The historical prices between 2013 and 2020 in the table below, note that these prices are recorded on the 1st day of the year, for example, 1st of January 2020. Students assume no dividend is distributed during this period and ignore the exchange rate conversion
1.Calculate the return and risk (standard deviation) of each stock.
Explain the relation (positive or negative) between risk and return based on your answers
2.Calculate the correlation coefficient between (a) Fosun and China Petroleum and (b) China Petroleum and CBA.
3.Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Fosun and 50% in China Petroleum.
4.Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 40% in CBA and 60% in China Petroleum.
5.Which portfolio (parts 4 or 5) provides better diversification? Explain your answer(s).
the table is provided with the image bellow
Step by step
Solved in 4 steps with 4 images
