PRICES AND RETURNS FOR APPLE AND GOOGLE

June 2007 - June 2012

Monthly mean 2.61% -0.24%
Monthly variance 0.0123 0.0100
Monthly standard deviation 11.08% 10.00%

Annual mean 31.31% -2.91% ANNUAL RETURN IMPLIES THE RETURN OF THE S
Annual variance 0.1472 0.1201 HERE APPLE IS RISKY BUT IT GIVES MO
Annual standard deviation 38.37% 34.65% ANNUAL STANDARD DEVIATION IMPLIES WHETHER IT IS RI

Date AAPL Google AAPL Google

1/Jun/07 122.04 580.11
2/Jul/07 131.76 645.90 0.0766 0.1074
1/Aug/07 138.48 599.39 0.0497 -0.0747
3/Jan/12 456.48 522.70 0.1197 0.0246
1/Feb/12 542.44 497.91 0.1725 -0.0486
1/Mar/12 599.55 471.38 0.1001 -0.0548
2/Apr/12 583.98 458.16 -0.0263 -0.0284
1/May/12 577.73 449.45 -0.0108 -0.0192
1/Jun/12 584.00 501.50 0.0108 0.1096
PLIES THE RETURN OF THE STOCK
E IS RISKY BUT IT GIVES MORE RETURN
IMPLIES WHETHER IT IS RISKY OR NOT
 COMPUTING COVARIANCE AND CORRELATION
Stock returns Return minus average
Date AAPL Google AAPL
2/Jul/07 7.66% 10.74% 0.0505
1/Aug/07 4.97% -7.47% 0.0237
1/Feb/12 17.25% -4.86% 0.1464
1/Mar/12 10.01% -5.48% 0.0740
2/Apr/12 -2.63% -2.84% -0.0524
1/May/12 -1.08% -1.92% -0.0369
1/Jun/12 1.08% 10.96% -0.0153

Average 2.61% -0.24%

Variance 0.0123 0.0100
Standard deviation 0.1108 0.1000 Average
using covariance fn

using correlation fn
when only
covariance and std
deviation is given
therefore here we can see that th
AND CORRELATION
Return minus average
Google Product
0.1099 0.0056
-0.0723 -0.0017
-0.0462 -0.0068
-0.0523 -0.0039
-0.0260 0.0014
-0.0168 0.0006
0.1120 -0.0017

Covariance computation
0.0020
0.0020

Correlation computation
0.1765323

0.1765323
therefore here we can see that the two stocks are not at all correlated.
USING TRENDLINE ON APPLE, GOOGLE RETURNS

Date AAPL Google

2/Jul/07
1/Aug/07
4/Sep/07
1/Oct/07
1/Nov/07
3/Dec/07
2/Jan/08
1/Feb/08
3/Mar/08
1/Apr/08
1/May/08
2/Jun/08
1/Jul/08
1/Aug/08
2/Sep/08
1/Oct/08
3/Nov/08
1/Dec/08
2/Jan/09
2/Feb/09
2/Mar/09
1/Apr/09
1/May/09
1/Jun/09
1/Jul/09
3/Aug/09
1/Sep/09
1/Oct/09
2/Nov/09
1/Dec/09
4/Jan/10
1/Feb/10
1/Mar/10
1/Apr/10
3/May/10
1/Jun/10
1/Jul/10
2/Aug/10
1/Sep/10
1/Oct/10
1/Nov/10
1/Dec/10
3/Jan/11
1/Feb/11
1/Mar/11
1/Apr/11
2/May/11
1/Jun/11
1/Jul/11
1/Aug/11
1/Sep/11
3/Oct/11
1/Nov/11
1/Dec/11
3/Jan/12
1/Feb/12
1/Mar/12
2/Apr/12
1/May/12
1/Jun/12
 CALCULATING THE MEAN AND STANDARD DEVIATION
OF A PORTFOLIO
Proportion of AAPL 0.5
Proportion of GOOG 0.5

AAPL GOOG Portfolio

return return return
2/Jul/07
1/Aug/07
4/Sep/07
1/Oct/07
1/Nov/07
3/Dec/07
2/Jan/08
1/Feb/08
3/Mar/08
1/Apr/08
1/May/08
2/Jun/08
1/Jul/08
1/Aug/08
2/Sep/08
1/Oct/08
3/Nov/08
1/Dec/08
2/Jan/09
2/Feb/09
2/Mar/09
1/Apr/09
1/May/09
1/Jun/09
1/Jul/09
3/Aug/09
1/Sep/09
1/Oct/09
2/Nov/09
1/Dec/09
4/Jan/10
1/Feb/10
1/Mar/10
1/Apr/10
3/May/10
1/Jun/10
1/Jul/10
2/Aug/10
1/Sep/10
1/Oct/10
1/Nov/10
1/Dec/10
3/Jan/11
1/Feb/11
1/Mar/11
1/Apr/11
2/May/11
1/Jun/11
1/Jul/11
1/Aug/11
1/Sep/11
3/Oct/11
1/Nov/11
1/Dec/11
3/Jan/12
1/Feb/12
1/Mar/12
2/Apr/12
1/May/12
1/Jun/12
Asset returns AAPL GOOG
Mean return
Variance
Standard deviation
Covariance

Portfolio mean return

Portfolio return variance

Portfolio return standard deviation

 CALCULATING THE MEAN AND STANDARD DEVIATION OF A PORTFOLIO
Asset returns AAPL GOOG
Mean return
Variance
Standard deviation
Covariance

Proportion of AAPL

Portfolio mean return

Portfolio return variance
Portfolio return standard deviation

Data table—varying the proportion of AAPL

Portfolio Portfolio
standard mean
deviation return
Proportion of AAPL
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
ON OF A PORTFOLIO
 A FOUR-ASSET PORTFOLIO PROBLEM
Mean
Variance-covariance, S returns
E(r)
0.10 0.01 0.03 0.05 6%
0.01 0.30 0.06 -0.04 8%
0.03 0.06 0.40 0.02 10%
0.05 -0.04 0.02 0.50 15%

Portfolio x 0.20 0.30 0.40 0.10

Portfolio y 0.20 0.10 0.10 0.60

Portfolio x and y statistics: Mean, variance, covariance, correlation

Mean, E(rx) 9.10% Mean, E(ry) 12.00%
Variance sx2 0.1216 Variance sy2 0.2034
Covariance(x,y) 0.0714
Correlation rxy 0.4540
it is having a positive correlation
Calculating returns of combinations of Portfolio x and Portfolio y
Proportion of x 0.3
Mean portfolio
return, E(rp) 99.13%
Portfolio variance
sp 2 0.1406

Portfolio standard
deviation sp 37.50%

Table of returns (using Data Table)

Standard
Proportion of x deviation Mean
37.50% 99.13%
-0.5
-0.4
-0.3
-0.2
-0.1 1200.00%
0.0
0.1 1000.00%
0.2
0.3 800.00%
0.4
0.5
600.00%
0.6
0.7
400.00%
0.8

200.00%

0.00%
 600.00%

400.00%

0.9
200.00%
1.0
1.1
1.2 0.00%
0.00% 200.00% 400.
1.3
1.4
 Chart Title
0%

0%

0%

0%

0%

0%

0%
0%

0%

0%

0%
0.00% 200.00% 400.00% 600.00% 800.00% 1000.00% 1200.00%
 A FOUR-ASSET PORTFOLIO PROBLEM
Mean
Variance-covariance, S returns
E(r)
0.10 0.01 0.03 0.05 6%
0.01 0.30 0.06 -0.04 8%
0.03 0.06 0.40 0.02 10%
0.05 -0.04 0.02 0.50 15%

Portfolio x 0.20 0.30 0.40 0.10

Portfolio y 0.20 0.10 0.10 0.60

Portfolio x and y statistics: Mean, variance, covariance, correlation

Mean, E(rx) 9.10% Mean, E(ry) 12.00%
Variance sx2 0.1216 Variance sy2 0.2034
Covariance(x,y) 0.0714
Correlation rxy 0.4540

Calculating returns of combinations of Portfolio x and Portfolio y

Proportion of x 0.3
Mean portfolio
return, E(rp) 11.13%
Portfolio variance
sp 2 0.1406

Portfolio standard
deviation sp 37.50%

Table of returns (using Data Table)

Proportion of x Standard deviation Mean

37.50% 11.13%
-1.0
-0.8
-0.6 Chart Title
-0.4 16.00% stock
-0.2
14.00%
0.0
0.2 12.00%

0.4 10.00%
0.6 stock 3
8.00%
0.8
6.00%
1.0
1.2 4.00% stock 1
1.4 2.00%
1.6
0.00%
25.00% 30.00% 35.00% 40.00% 45.00% 50.00% 55.00% 60.00% 65.
 6.00%

4.00%

2.00%

0.00%
1.8 25.00% 30.00% 35.00% 40.00% 45.00% 50.00% 55.00% 60.00% 65.
2.0
2.2
2.4
2.6
2.7
Stock1 31.62% 6.00%
Stock2 54.77% 8.00%
Stock3 63.25% 10.00%
Stock4 70.71% 15.00%
ROBLEM

art Title
stock 4

stock 3

stock 2

00% 45.00% 50.00% 55.00% 60.00% 65.00% 70.00% 75.00%

00% 45.00% 50.00% 55.00% 60.00% 65.00% 70.00% 75.00%