Answer to Question #35997 in Statistics and Probability for christine

Question

Students must download monthly historical stock prices from two US stocks from
different industries for a period of 5 years. It is advisable to use excel spreadsheet
function.

Align the dates of the two stocks so that the returns of the two stocks are on the same
month and calculate the historical monthly returns of these stocks using the adjusted
closing prices from yahoo using monthly return =(Pricemonth2 – Pricemonth1) / Pricemonth1.
After which, find the average monthly return.

Using the monthly return, calculate the standard deviations using the function STDEV in
excel
Calculate the annualised expected returns (=12 x average monthly return) and standard
deviations of both stocks and the correlation of the returns using the function CORREL.
Students should comment on the risk and return for their two stocks of choice. Also
should comment on the correlation.

Answer 1

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