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RISK PORTFOLIO ANALYSIS

RISK PORTFOLIO ANALYSIS

For risk analysis we use the correlation and we check the variable dependable or nondependable each others.

Rules:

If variables answers will be (+ve) then variable dependable or if the variables answer are (-ve) then nondependable.
(+ve) risky protfolio
(-ve) less risky protfolio

Correlation:

It show the relationship between two or more than two variable

If the answer of the correlation is positive it indicate that the securities in the portfolio are depend on each other and this protfolio is a risky portfolio.
If the answer of correlation is negative it indicate that the securiteis in the protfolio are not depend on each other and this protfolio is called less risky protfolio.

Example:
A group securities       NBP , Nestle     answer (+0.05)
B group Securites       Lucky, NBP      answer ((-0.03)

Decision:

risk taker will choose option A
risk avioder will choose option B

S.D = risk
use the S.D formula to find out portfolio risk
in which  R is given, Sum of P must be eaqual to 1, and sum R x P total will be  E(R)= return  and  
 [R - E(R)]2  and sum[R - E(R)]2 x P

suppose
R= 0.20 , 0.16, 0.12, 0.05, -0.05
P=0.15, 0.20, 0.40, 0.10, 0.15 =1
after multipy ΣR x P  the  Sum R x P = 0.1075  it will called E(R)= return
[R - E(R)]2= will be 0.0085, 0.0027, 0.00015, 0.0033, 0.024
and last Σ[R - E(R)]2 x P will be total 0.00589

S.D(risk)= Square{Σ[R - E(R)]2 x P}
             =square{0.00589}
            = 0.076
    S.D=7.6%    or Risk = 7.6%

Note = Weight sum must be equal to 100%


INVESTMENT AND PORTFOLIO MANAGEMENT
INVESTMENT VS SPECULATION AND GAMBLING
TYPES OF INVESTOR
INVESTMENT COMPANIES
TYPES OF MUTUAL FUNDS
TYPES OF BONDS FUNDS
MONEY MARKET FUNDS
SECURITIES MARKET
TYPES OF INDEX
TYPES OF BROKERS
BROKER'S ACCOUNT
MARGINAL ACCOUNT
ORDER AND ITS TYPES
RISK AND ITS TYPES
RETURN PORTFOLIO ANALYSIS
RISK PORTFOLIO ANALYSIS
RISK AND RETURN OF AN INDIVIDUAL SECURITIES
ANALYSIS OF COMMON STOCK VALUATION
CAPM MODEL (CAPITAL ASSET PRICING MODEL)
MARKOWITZ MODEL




MBA NOTES INVESTMENT AND PORTFOLIO MANAGEMENT
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