Answer to Question #258626 in Finance for Meet

Question #258626

1. From the following information, calculate the volatility of the portfolio and comment

on the relationship among the stocks return.

Day Stock A Stock B Stock C 

1 0.4      2.2      0.6

2 1.1      1.3      0.5 

3 0.9      1.2      1.4

4 1.7      1.9     1.6


1
Expert's answer
2021-10-31T18:27:27-0400

portfolio volatility = \sqrt{Var(X+Y+Z)}

Var(X+Y+Z)=Var(X)+Var(Y)+Var(Z)

X - Stock A, Y - Stock B, Z - Stock C

Var(X)=0.217,Var(Y)=0.1725,Var(Z)=0.232


portfolio volatility = \sqrt{0.217+0.1725+0.232}=0.788


relationship among the stocks return:

correlation coefficients:

r_{XY}=-0.187 - a non significant very small negative relationship

r_{XZ}=0.633 - a non significant large positive relationship

r_{YZ}=-0.094 - a non significant very small negative relationship


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