The returns on Relnvest Ltd. and GEM Inc. stocks over the past five months are as follows: Relnvest Ltd GEM Inc January 15% -3% February -3% 3% March 8% 4% April -1% 13% May -4% -2% a. Calculate the standard deviation of the returns of each stock. b. Calculate the standard deviation of the returns of a portfolio that invests in both stocks equally each month. c. Which stock is least risky if held on its own? Is the standard deviation of your portfolio returns smaller or higher than the standard deviation of this stock? What is the underlying reason to this
The returns on Relnvest Ltd. and GEM Inc. stocks over the past five months are as follows: Relnvest Ltd GEM Inc January 15% -3% February -3% 3% March 8% 4% April -1% 13% May -4% -2% a. Calculate the standard deviation of the returns of each stock. b. Calculate the standard deviation of the returns of a portfolio that invests in both stocks equally each month. c. Which stock is least risky if held on its own? Is the standard deviation of your portfolio returns smaller or higher than the standard deviation of this stock? What is the underlying reason to this
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter6: Risk And Return
Section: Chapter Questions
Problem 4P: An analyst gathered daily stock returns for Feburary 1 through March 31, calculated the Fama-French...
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