This assignment will require you to analyze time series of monthly returns for different securities.
[20 points] 3) Calculate the MONTHLY return data for the 10/01/2017 – 09/30/2020 period for the selected three securities. Note: Return for Month 2 = (Adj Close for Month 2/Adj Close for Month 1) – 1
[7 points] 4) Calculate the average arithmetic monthly return, variance, and standard deviation of returns for 10/01/2017 – 09/30/2020 period for the selected three securities. FIN 5130 Mini-case 1 Real-world Application: Risk and Return Dr. Darshana Palkar Page 2 of 2
[8 points] 5) Calculate the covariance and correlation of returns between Company A and Company B for the 10/01/2017 – 09/30/2020 period. What does the correlation indicate?
[15 points] 6) Calculate the stock betas for Company A and Company B for the 10/01/2017 – 09/30/2020 period. What do the betas indicate? Hint: What is a proxy for the market portfolio? What should go in the known-xs array and what should go in the known-ys array?
[25 points] 7) Suppose you invest 50% in Company A and 50% in Company B. What is your portfolio average return and standard deviation?
[15 points] 8) Compare the average return and standard deviation of Company A and Company B from #4 with the portfolio average return and standard deviation from #7. What do you observe? What can you conclude from your findings?
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