In Class Assignment #4

Download historical monthly stock return data for the past 5 years for APPL and AM

Build an equal-weighted portfolio of APPL and AMZN.

Report the following statistics:

1. Beta for APPL

2. Beta for AMZN.
3. Do APPL and AMZN satisfy the usual "higher beta, higher return" relationship?
4. Compute the expected return, standard deviation and beta of the equal-weighte
5. Which of the following investments is "best"? APPL, AMZN or Portfolio?
Bonus:
Can you find weights on APPL and AMZN which produce an even "better" investme
ears for APPL and AMZN, VFINX.

turn" relationship?
of the equal-weighted portfolio.
or Portfolio?

en "better" investment than your answer to number 5?

 Analysis of APPL, AMZN, Portfolio
Returns
VINX AMZN APPL VFINX AMZN APPL EQ Portfolio
11/1/2017 226.9248 58.8375 40.77422 0.64% -0.62% -1.17% -0.89%
12/1/2017 228.3869 58.4735 40.29693 6.19% 24.06% -1.06% 11.50%
1/1/2018 242.5312 72.5445 39.86831 -3.70% 4.24% 6.38% 5.31%
2/1/2018 233.5612 75.6225 42.41381 -2.97% -4.30% -5.42% -4.86%
3/1/2018 226.627 72.367 40.11454 0.80% 8.21% -1.50% 3.35%
4/1/2018 228.4311 78.3065 39.51203 2.39% 4.05% 13.08% 8.57%
5/1/2018 233.901 81.481 44.67877 0.16% 4.31% -0.56% 1.87%
6/1/2018 234.2837 84.99 44.42864 4.16% 4.57% 2.80% 3.68%
7/1/2018 244.0353 88.872 45.67189 3.25% 13.24% 19.62% 16.43%
8/1/2018 251.9573 100.6355 54.63395 0.13% -0.48% -0.48% -0.48%
9/1/2018 252.2761 100.15 54.37035 -6.45% -20.22% -3.05% -11.63%
10/1/2018 236.0004 79.9005 52.71328 2.03% 5.77% -18.40% -6.32%
11/1/2018 240.7833 84.5085 43.01168 -9.50% -11.13% -11.36% -11.25%
12/1/2018 217.9044 75.0985 38.12485 8.54% 14.43% 5.52% 9.97%
1/1/2019 236.5192 85.9365 40.22758 3.20% -4.59% 4.03% -0.28%
2/1/2019 244.0891 81.9915 41.84935 1.40% 8.59% 10.17% 9.38%
3/1/2019 247.4955 89.0375 46.10671 4.59% 8.19% 5.64% 6.91%
4/1/2019 258.867 96.326 48.70878 -6.36% -7.86% -12.76% -10.31%
5/1/2019 242.3912 88.7535 42.49488 6.51% 6.68% 13.49% 10.08%
6/1/2019 258.1821 94.6815 48.22628 1.92% -1.42% 7.64% 3.11%
7/1/2019 263.1362 93.339 51.91051 -1.59% -4.85% -2.02% -3.43%
8/1/2019 258.9494 88.8145 50.86275 1.41% -2.27% 7.70% 2.72%
9/1/2019 262.5913 86.7955 54.78112 2.61% 2.35% 11.07% 6.71%
10/1/2019 269.4547 88.833 60.84454 3.62% 1.36% 7.43% 4.40%
11/1/2019 279.2101 90.04 65.36704 2.53% 2.61% 10.21% 6.41%
12/1/2019 286.2866 92.392 72.03988 0.41% 8.71% 5.40% 7.05%
1/1/2020 287.4635 100.436 75.93076 -8.24% -6.22% -11.68% -8.95%
2/1/2020 263.7726 94.1875 67.06222 -12.76% 3.50% -6.76% -1.63%
3/1/2020 230.1271 97.486 62.53192 13.27% 26.89% 15.54% 21.21%
4/1/2020 260.6694 123.7 72.24773 4.76% -1.28% 8.22% 3.47%
5/1/2020 273.0665 122.1185 78.18397 1.48% 12.96% 15.05% 14.00%
6/1/2020 277.115 137.941 89.95004 6.13% 14.71% 16.51% 15.61%
7/1/2020 294.102 158.234 104.8036 7.40% 9.05% 21.44% 15.24%
8/1/2020 315.8711 172.548 127.2714 -4.39% -8.76% -10.09% -9.42%
9/1/2020 301.9941 157.4365 114.4287 -2.28% -3.58% -6.00% -4.79%
10/1/2020 295.1178 151.8075 107.5616 10.94% 4.34% 9.36% 6.85%
11/1/2020 327.3907 158.402 117.63 3.44% 2.81% 11.65% 7.23%
12/1/2020 338.6566 162.8465 131.3335 -0.64% -1.56% -0.55% -1.05%
1/1/2021 336.482 160.31 130.611 2.76% -3.53% -8.11% -5.82%
2/1/2021 345.7606 154.6465 120.0204 4.03% 0.04% 0.88% 0.46%
3/1/2021 359.6982 154.704 121.082 5.66% 12.07% 7.62% 9.84%
4/1/2021 380.0746 173.371 130.3105 0.69% -7.05% -5.21% -6.13%
 5/1/2021 382.692 161.1535 123.5204 2.00% 6.74% 10.10% 8.42%
6/1/2021 390.3575 172.008 135.9931 2.68% -3.27% 6.50% 1.61%
7/1/2021 400.8247 166.3795 144.8302 3.03% 4.30% 4.09% 4.20%
8/1/2021 412.9657 173.5395 150.7581 -4.95% -5.35% -6.66% -6.01%
9/1/2021 392.5332 164.252 140.7115 7.31% 2.66% 5.87% 4.26%
10/1/2021 421.2159 168.6215 148.9653 -0.70% 3.99% 10.35% 7.17%
11/1/2021 418.2558 175.3535 164.3789 4.11% -4.93% 7.58% 1.33%
12/1/2021 435.4616 166.717 176.8382 -4.87% -10.28% -1.57% -5.93%
1/1/2022 414.261 149.5735 174.0597 -3.00% 2.67% -5.53% -1.43%
2/1/2022 401.8248 153.563 164.4395 3.38% 6.14% 5.88% 6.01%
3/1/2022 415.4034 162.9975 174.112 -8.45% -23.75% -9.71% -16.73%
4/1/2022 380.2849 124.2815 157.2003 0.17% -3.28% -5.59% -4.43%
5/1/2022 380.9325 120.2095 148.4155 -8.61% -11.65% -8.01% -9.83%
6/1/2022 348.1337 106.21 136.5304 9.61% 27.06% 18.86% 22.96%
7/1/2022 381.6 134.95 162.2846 -4.09% -6.06% -3.26% -4.66%
8/1/2022 365.99 126.77 157.0019 -9.59% -10.86% -11.98% -11.42%
9/1/2022 330.89 113 138.2
10/1/2022 null null null
EQ Portfolio Problem 1. -- Beta for APPL 1.222

Problem 2. -- Beta for AMZN 1.299

Problem 3. -- Higher beta, higher return? Expected Return

APPL
2.54%

Beta
APPL
1.222

Problem 4. -- Portfolio statistics Method 1

Expected Return 2.06%
Standard Devation 8.57%
Beta 1.261

Problem 5. -- Which is the "best" portfolio?

APPL
Sharpe Ratio 0.28
Bonus:
Weight on APPL
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
 0.006

Expected Return Standard Deviation

AMZN APPL AMZN
1.59% 9.21% 9.73%

Beta
AMZN Cov(APPL, AMZN) 0.005702
1.299

Method 2 Portfolio Weights

2.06% APPL AMZN
8.57% 0.5 0.5
1.261

AMZN Portfolio
0.16 0.24 <--best investment is APPL

Portfolio Ex Portfolio Risk Sharpe Ratio

1.59% 9.73% 0.16
1.68% 9.37% 0.18
1.78% 9.07% 0.20
1.87% 8.83% 0.21
1.97% 8.66% 0.23
2.06% 8.57% 0.24
2.16% 8.55% 0.25
2.25% 8.61% 0.26
2.35% 8.74% 0.27
2.44% 8.94% 0.27
2.54% 9.21% 0.28