I would appreciate the help to know what topics I have to discuss to get good po
ID: 2816117 • Letter: I
Question
I would appreciate the help to know what topics I have to discuss to get good points on this. I know I have to discuss standard deviation, negative covariance in stocks, and what else? thank you.
the objective is to select three stocks you think are complementary with respect to risk—that is, the stocks either are negatively related or have a low positive relationship. You should select companies you believe can combined to form a portfolio with “below-average” risk.
1. Identify the stocks you have chosen, and briefly discuss the industry, or line of business, in which each company should be classified.
2. Discuss why you believe the companies can be combined to produce a portfolio with a below-average level of risk.
3. Briefly discuss why you believe holding the stocks you have chosen will help to weather significant swings that could possibly occur in the stock markets during the next few years.
Explanation / Answer
1. As tthe party requires the stocks which should be below average risk , for that purpose the party should choose the securities which should be negatively correlated . As per the market trend , the should buy equity , debt securities and preference shares of reliance ltd. , HDFC , and larsen and toubro respectively.
2. If the party will buy the stocks of the above mentioned companies , it will result in good portfolio because as reliane is a growing company and they will definitely give good return on their stocks of equity. on the other hand debt of hdfc will beneficial because the corporation is not growing but stable. On the other hand , preference shares of larsen and toubro will be beneficial.
3. According to me, all these shares will become beneficial because all these companies are in growing trend and would definitely give good results further.