BBF315/03: Risk Management Assignment, WOU, Malaysia You are currently working as an analyst at Financial Consulting Bhd. Your boss has instructed you to form an equity fund portfolio which consists

You are currently working as an analyst at Financial Consulting Bhd. Your boss has instructed you to form an equity fund portfolio which consists of TWO SERVICE COMPANIES. The portfolios have total fund size of RM10 million. Before you can start with your analysis, you have to collect the monthly stock prices of each stock in your portfolio over the last 12 months.

You are required to:

(a) Describe the background (operation, management team, market….etc.) of the companies.

(b) Compute the monthly stock return of each stock in your portfolio for the last 12 months. Based on the stock return data, decide which investment appears to be riskier.

(c) Calculate the average monthly stock return and standard deviation of returns for each stock over the last 12 months.

(d) Compute covariance and correlation between each possible pair of stocks in your portfolio.

(e) Calculate the portfolio’s return and standard deviation assuming funds are split equally in each of the two companies’ stocks.

(f) Recommend which will you invest, either in the stock separately or combined based on the above calculation with justification.

(g) You are required to use correct writing skills, citation of references, and other sources of information

Answer

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