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H10+Practical+Work+on+Two-Security+Portfolios

# H10+Practical+Work+on+Two-Security+Portfolios - HAAS SCHOOL...

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H AAS S CHOOL OF B USINESS U NIVERSITY OF C ALIFORNIA AT B ERKELEY UGBA 103 A VINASH V ERMA H OMEWORK 10 : D UE A UGUST 1 2011 Identify two stocks and name them as first and second stock. Download into an excel worksheet the historical price data on the two stocks from January 1, 2010 to date from www.finance.yahoo.com . Compute daily returns on the two stocks for each trading day. Now, using the CORREL function in MS Excel, compute the correlation between the returns on the two stocks. Also compute the expected return and the standard deviation of returns on each of the two stocks using the AVERAGE and the STDEV function in MS Excel. Annualize the expected returns and the standard deviations of the two stocks by assuming that the number of trading days in the year is 252. Assume that Ms. X has 9000 shares in the first stock and Mr. Y has 4500 shares in the second stock. Ms. X and Mr. Y decide to get married, and want to allocate their combined wealth between the two stocks in such a way that the standard deviation of the returns on their portfolio is minimized.
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