A-The following s are the chosen companies from S&P Index

1-Boston Scientific Corporation(BSX): Boston Scientific Corporation develops, manufactures, and markets medical devices used in various interventional medical specialties worldwide. It offers cardiac rhythm management products, which monitor the heart and deliver electricity to treat cardiac abnormalities; and RF generators, intracardiac ultrasound and steerable ablation catheters, and diagnostic catheters for the diagnosis and treatment of cardiac arrhythmias.

2-Loews Corporation(L): Loews Corporation, through its subsidiaries, operates primarily as a commercial property and casualty insurance company in the United States. It provides professional liability and other coverages through property and casualty products and services; surety and fidelity bonds, and vehicle warranty services; and risk management, information, warranty, and claims administration services

3-Ryder System, Inc(R): Ryder System, Inc. provides transportation and supply chain management solutions. The company operates in three segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Contract Carriage (DCC).

4-United States Steel Corp(X): United States Steel Corporation, through its subsidiaries, engages in the production and sale of steel products primarily in North America and Europe. The company operates through three segments: Flat-rolled Products, U. S. Steel Europe (USSE), and Tubular Products (Tubular).

5-Western Digital Corp(WDC): Western Digital Corporation primarily engages in the design, development, manufacture, and sale of hard drives worldwide. It offers hard drives, including 3.5inch and 2.5-inch form factor drives under the WD Caviar, WD RE, WD VelociRaptor, WD Scorpio, WD Elementstm, WD AV, WD ShareSpacetm, WD S25, My Passport, My Book, and My DVR Expander brand names.

B-Risk and return comparison between the 5 companies:

AVG.Mth.R STD.DEV(monthly RTS) Annual RT STD.DEV(ANNUAL)

BSX L R X WDC -2.29% 0.39% 0.24% 0.07% 1.40% 11.47% -27.52% 39.72% 7.68% 4.64% 26.61% 11.30% 2.82% 39.16% 18.95% 0.84% 65.65% 13.29% 16.81% 46.04%

The above table shows monthly and annual returns and risk( which measured by standard deviation). The lowest return belongs to the stock of BSX(-27.52%) compared to the stock of WDC which has a return of 16.81%. the riskiest stock is of the company X which has a standard deviation of 65.65% compared with company L with the lowest risk of 26.61%.

C-Covariance and correlation between the 5 companies:

BSX BSX 0.012931 L 0.004266 R 0.005367 X 0.009407 WDC 0.00722

Covariance Matrix L R X WDC 0.004266 0.005367 0.009407 0.00722 0.005801 0.004978 0.010113 0.004743 0.004978 0.012565 0.013206 0.006558 0.010113 0.013206 0.035317 0.012481 0.004743 0.006558 0.012481 0.017367

Covariance matrix shows the pair wise combination of all portfolio components. The above table shows the the covariance between all of the five companies are positive .the covariance of each company stock with itself equal to its variance.

BSX BSX L R X WDC 1 0.492512 0.421028 0.440197 0.481783

Correlation cofficient L R 0.492512 0.421028 1 0.583093 0.583093 1 0.706567 0.626937 0.472579 0.443929

X WDC 0.440197 0.481783 0.706567 0.472579 0.626937 0.443929 1 0.503973 0.503973 1

The above table shows that all of the 5 companies are positively correlated. Since all the of the correlation outcomes are less than one this means that there will benefit from diversification.

D-Minimum variance portfolio:

In order to find the minimum variance portfolio I have chosen company R and X . the findings were as minimum variance portofolio wx 0.414734686 wr 0.585265314 Rp 0.001386579 variance.p 0.021019875 STD.DEV.p 0.144982327 follow:

The combination of the two securities that will result in the least possible variance are .415 for company X and .585 for company R. the minimum variance equal .0210 and the return on this portfolio is of .00138.

E-Portfolio risk return and efficient frontier :

1 2 3 4 5 6 7 8 RP 0.008 0.02 0.05 0.07 0.09 0.11 0.13 0.15 var.P 0.066301 0.066424 0.067722 0.070858 0.081602 0.10121 0.129695 0.167051 STD.DEV.P 0.25749 0.257728 0.260235 0.266192 0.285661 0.31814 0.360132 0.408719

0.148 0.128 0.108 0.088 0.068 0.048 0.028 0.008 0.2

40.87%, 15.00% 36.01%, 13.00% 31.81%, 11.00% 28.57%, 9.00% 26.62%, 7.00% 26.02%, 5.00% 25.77%, 2.00% 25.75%, 0.80% 0.25 0.3

0.35

0.4

0.45

0.5

portfolio Risk-Retun profile

The above graph called efficient frontier . the graph shows the risk and return characteristics of all possible portfolios . all of the points on the above plot dominates the other possible portfolios (points below the efficient frontier ) because they offer the specified return with the least variance (risk). All points on the above graph are efficient portfolios . a conservative investor will choose points on the lower left of the frontier while a more growth oriented investors will chose points on the right of the frontier.

F-Beta and alpha of each company:For this we take market index (S&P) as X and the company as Y. the outcomes were as follow:

Beta Alpha

BSX L R X WDC 1.158434 1.231139 1.497168 2.780817 1.393968 -0.0219 0.004964 0.003686 0.003183 0.015248

The above table shows that all of the securities are aggressive securities ( Beta is greater than on) which means for every 1% in market index return (S&P) the returns of the companies increase by more than one percent . for example for every 1% increase in S&P return , BSX return increase by 1.158. Alpha indicates the value of y ( each company return ) when value of X( S&P Return) equal zero. For example the return on security BSX equal -.0219 when the return on the market equal zero.

Portfolio management assignment

Name: Duaa Hassan Ali Al-Aradi Section:02 Student number:200070986