INVESTMENT ANALYSIS
CARLIFORNIA REIT AND BROWN GROUP
, Question 1
The variability (standard deviation) of the returns of California REIT, Brown Group and the
Vanguard Index 500 Trust were computed using the formula as shown below.
The results obtained are shown in the table below.
Stock California REIT Brown Group Vanguard 500
Standard Deviation (STD) 9.23% 8.17% 4.61%
The variability for California REIT is 9.23%, for Brown group it is 8.17%. Both these values
almost double the variability of the Vanguard 500 (STD of 4.61%). It is evident from the above
mentioned values that the California REIT stock appears to be the riskiest since it has the highest
value of standard deviation. Generally, in comparison to the Vanguard Index 500, both California
REIT and Brown Group are much more risky.
Question 2
The variability of each Portfolio, with 99% of funds invested in the Index fund and 1% in each
individual stock is calculate using the equation below.
σ2p=wi2σ2i + wj2σ2j + 2wiwjCov (ri, rj) = wi2σ2j + wi2σ2j + 2wiwjσiσjPij
Where; w = the portfolio weight of the stock
σ = standard deviation of the stock
Cov (ri, rj) = covariance of the two assets under consideration
Pij = correlation coefficient of the stocks under consideration
CARLIFORNIA REIT AND BROWN GROUP
, Question 1
The variability (standard deviation) of the returns of California REIT, Brown Group and the
Vanguard Index 500 Trust were computed using the formula as shown below.
The results obtained are shown in the table below.
Stock California REIT Brown Group Vanguard 500
Standard Deviation (STD) 9.23% 8.17% 4.61%
The variability for California REIT is 9.23%, for Brown group it is 8.17%. Both these values
almost double the variability of the Vanguard 500 (STD of 4.61%). It is evident from the above
mentioned values that the California REIT stock appears to be the riskiest since it has the highest
value of standard deviation. Generally, in comparison to the Vanguard Index 500, both California
REIT and Brown Group are much more risky.
Question 2
The variability of each Portfolio, with 99% of funds invested in the Index fund and 1% in each
individual stock is calculate using the equation below.
σ2p=wi2σ2i + wj2σ2j + 2wiwjCov (ri, rj) = wi2σ2j + wi2σ2j + 2wiwjσiσjPij
Where; w = the portfolio weight of the stock
σ = standard deviation of the stock
Cov (ri, rj) = covariance of the two assets under consideration
Pij = correlation coefficient of the stocks under consideration
