Question

3.Stock W and Stock M’s annual returns are as following, calculate the average return, standard deviation...

3.Stock W and Stock M’s annual returns are as following, calculate the average return, standard deviation for Stock W, Stock M, and an equally weighted portfolio WM (i.e., 50% in W and 50% in M) with explanation.

A: ϱ= -1

Year

Stock W

Stock M

Portfolio WM

2008

40%

-10%

15%

2009

-10%

40%

15%

2010

40%

-10%

15%

2011

-10%

40%

15%

2012

15%

15%

15%

Avg. Return

Stan. Dev.

B: ϱ= 0.35

Year

Stock W

Stock M

Portfolio WM

2008

40%

40%

40%

2009

-10%

15%

2.5%

2010

35%

-5%

15%

2011

-5%

-10%

-7.5%

2012

15%

35%

25%

Avg. Return

Stan. Dev.
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