Question

you decide to create a two stock portfolio of stocks A and B, calculate the covariance between the two stocks and the variance of each stock. Use this information to determine the expected return and standard of the minimum variance portfolio between the 2 securities. please show your work

time	A	B
1	18.56	12.43
2	12.34	13.45
3	14.12	4.32
4	-1.57	8.54
5	3.12	12.21
6	-9.28	-4.91

Answer 1

A Hear (A-A) CB-B) (A-B-B) 18.58 12-34 1 12-34 t3-45 2 u.32 t4-12 3 (6.23) (o--6) (e-62)x C-6) 8-54 -1-57 12-2 3./2 5 - 1-28 .9 Total f) 3 7-38 46.04 53-49 246.1 242-3054 Cov (A, B) TalG -93-96 y.= 41-15y, 6-23 40- 38 V9.69. 6.42y T Cov (A,e WA = vauance potfolio tonula Cov CA,B) 2 41-15-40 38 (93-16+41- IS) -240-38 IT O-O185 O.019 o.981

Enpected Petuin of portfpio xA + 0.019x 6. 23 + 0.481 x+.67 764 Stondaid Serintrinat poatfolo 2WAup CONCA,B) J 27 (o.019x 9.69) + (0.981 x 6 42)+ 2 (0.015x0- 981) Ho-3 8 X 6.42 .