Executive summary:

This study looks at the risks and returns portfolio analysis of four different types of investments over
three years. These investments are the Goodman group (GMG.AX), the Origin Energy Limited
(ORG.AX), the Commonwealth bank (CBA.AX) and the Worly Limited (WOR.AX).
The investment in GMG.AX had small average monthly return of 1.55%, but it was riskier with a
standard deviation of 9.15%. This means there is a balance between money and taking on risks. The
second type of investment, the ORG.AX was more risky than GMG.AX with a standard deviation of
10.10%, but the average monthly return was 2.54%. So, it’s a critical situation to invest in these
stocks.
The third investment, the CBA.AX was less risky than first and second type of investment and much
better in terms of returns with 101.41%. Finally the fourth type, the WOR.AX has same level of risk
and return percentage as CBA.AX. It had an average monthly return of 101.76% and standard
deviation of 6.55%.
In summary, this research shows how important it is to think about risks and returns in investment.
It also highlights the need to choose investments that match the financial goals and how much risk
the investors can handle and also contribute to a better environment.
Introduction:
The risk-return and portfolio evaluation is a fundamental concept of finance, demonstrating a
positive relationship between risk and return. A portfolio composed of all equities presents both
higher risk and higher potential returns. The study covers four indices over a three year period (01-
01-2021 to 31-12-2023): Goodman group (GMG.AX), Origin energy limited (ORG.AX),
Commonwealth bank (CBA.AX), Worly limited (WOR.AX). Calculations include average returns and
standard deviations, variances, geometric means, annual returns, and holding period returns of each
indices to evaluate their historical performance.
In addition, the analysis of historical return relationships and correlations of these indices,
considering equally-weighted portfolios to assess risk-return trade-offs compared with each other
indices or stocks. This report also offers recommendations to investors to choose the best company
which provide profitable returns with manageable risks.
B
i. The monthly returns of the following companies:

Returns%

Month GMG.AX ORG.AX CBA.AX WOR.AX

Jan-2021 N.A N.A N.A N.A

Feb-2021 -6.33% -5.06% 97.66% 97.20%

Mar-2021 9.42% 4.22% 107.43% 94.50%
Apr-2021 4.36% -8.77% 103.41% 105.91%
May-2021 2.75% -4.57% 111.99% 97.24%
Jun-2021 8.96% 13.60% 100.15% 113.26%

Jul-2021 7.71% -8.87% 99.78% 93.39%

Aug-2021 2.16% 8.27% 100.47% 93.82%
Sept-2021 -6.27% 6.29% 106.28% 96.78%

Oct-2021 1.01% 8.60% 100.34% 109.18%

Nov-2021 12.74% -4.95% 89.01% 88.17%
Dec-2021 7.33% 9.17% 108.39% 111.43%

Jan-2022 -12.00% 7.25% 92.81% 108.65%

Feb-2022 -4.14% 1.42% 99.70% 103.29%
Mar-2022 2.97% 9.30% 115.20% 110.52%
Apr-2022 4.76% 12.25% 98.21% 107.75%
May-2022 -14.30% 0.15% 100.46% 105.97%

Jun-2022 -13.19% -16.35% 86.60% 96.61%

Jul-2022 16.96% 3.66% 111.50% 100.49%
Aug-2022 -4.98% 6.23% 96.73% 101.54%
Sept-2022 -19.78% -18.07% 95.02% 89.06%
Oct-2022 7.73% 10.72% 115.41% 112.10%
Nov-2022 12.47% 41.11% 103.04% 103.57%
Dec-2022 -9.21% -1.78% 95.12% 101.49%
 Jan-2023 16.03% -3.24% 107.27% 103.00%
Feb-2023 -0.55% 7.23% 91.49% 98.19%
Mar-2023 -5.93% 5.63% 99.71% 96.56%
Apr-2023 2.77% 0.60% 101.06% 104.37%
May-2023 1.66% -0.12% 97.40% 108.31%
Jun-2023 2.24% 0.96% 103.61% 96.93%
Jul-2023 3.11% 0.71% 105.43% 109.94%
Aug-2023 13.73% 2.83% 96.66% 100.63%
Sept-2023 -8.18% 0.80% 100.16% 101.14%
Oct-2023 -3.31% 6..45% 96.59% 94.14%
Nov-2023 9.69% -9.75% 108.39% 103.48%
Dec-2023 11.21% 2.79% 106.82% 102.95%

I. Line Chart of GMG:

Line Chart with Monthly Returns

20.00%
15.00%
10.00%
5.00%
Returns

0.00%
21 21 21 21 21 21 22 22 22 22 22 22 23 23 23 23 23 23
-5.00%eb- pr- un- ug- ct- ec- eb- pr- un- ug- ct- ec- eb- pr- un- ug- ct- ec-
F A J A O D F A J A O D F A J A O D
-10.00%
-15.00%
-20.00%
-25.00%
Months

Line Chart of CBA:

 Line Chart with Monthly Returns
140.00%
120.00%
100.00%
Returns-CBA.AX

80.00%
60.00%
40.00%
20.00%
0.00%
1 1 1 1 1 1 2 2 2 2 2 2 3 3 3 3 3 3
b-2 r-2 n-2 g-2 ct-2 c-2 b-2 r-2 n-2 g-2 ct-2 c-2 b-2 r-2 n-2 g-2 ct-2 c-2
Fe Ap Ju Au O De Fe Ap Ju Au O De Fe Ap Ju Au O De
Months

Line Chart of WOR:

Line Chart with Monthly Returns

120.00%
100.00%
80.00%
iReturns-WOR-AX

60.00%
40.00%
20.00%
0.00%
1 1 1 1 1 1 2 2 2 2 2 2 3 3 3 3 3 3
b-2 r-2 n-2 g-2 ct-2 c-2 b-2 r-2 n-2 g-2 ct-2 c-2 b-2 r-2 n-2 g-2 ct-2 c-2
Fe Ap Ju Au O De Fe Ap Ju Au O De Fe Ap Ju Au O De
Months
 Line Chart of ORG:
4.00%
2.00%
0.00%
Nov-23 Dec-23
-2.00%
Returns

-4.00%
-6.00%
-8.00%
-10.00%
-12.00%
Months

II. Calculation of arithmetic mean, variance and standard deviation:

GMG.AX ORG.AX CBA.AX WOR.AX

Arithmetic mean (%) 1.55% 2.54% 101.41% 101.76%

Variance (%) 0.84% 1.02% 0.47% 0.43%
Standard deviation (%) 9.15% 10.10% 6.85% 6.55%

Finance for business:

Risk and return behaviour of GMG.AX stocks:
 The arithmetic mean of the stock is 1.55% which indicates the stock has generated positive
returns for the period (January 2021 – December 2023).
 The standard deviation is 9.15% which denotes the price fluctuations of the stock.
 A higher variance implies higher volatility and potentially higher risk. Here, the variance is
0.84%.
 Overall, after examining the volatility of the stocks, the investors should carefully consider
these factors because there is both potential gain and risk to invest in GMG.AX
Risk and return behaviour of ORG.AX stocks:
 In November 2022, the return 41.11% and in June 2022, the return was -16.35%, which
means there is a tendency for investments with higher returns as well as higher risk.
 The standard deviation is 10.10% represents a greater degree of volatility and measures the
dispersion of returns around the mean.
Risk and return behaviour of CBA.AX stocks:
 Over the past three years the CBA.AX has demonstrated a positive average return of
101.41% indicating the historical performance over the three year period.
  However this has been accompanied by a standard deviation of 6.85% which indicates
significant price fluctuations and moderate risk. As a result, it can be considered a relatively
volatile investment.
Risk and return behaviour of WOR.AX stocks:
 Over the past three years, WOR.AX has demonstrated a positive average return of 101.76%,
indicating a significant growth rate.
 The standard deviation of the stock is 6.55%, which tells us the volatility of the stock. The
standard deviation of 6.55% indicates that there is a moderate risk of investment.
 So after comparing the volatility of the mean and standard deviation, it can be said that
investors can expect substantial growth with manageable risk.

III. calculation of geometric mean of the monthly return for each stock:

GMG.AX ORG.AX CBA.AX WOR.AX

Geometric 1.14% 2.08% 101.30% 101.66%

mean

Geometric mean:

 Geometric mean provides the most accurate information to calculate the average growth
rates. It is commonly used to calculate the annual return on a financial portfolio of securities.
 The geometric mean of GMG.AX is 1.14% and ORG.AX is 2.08% followed by 101.30% for
CBA.AX and 101.66% for WOR.AX respectively.
 Here, the geometric mean of GMG.AX and ORG.AX is relatively low compared to CBA.AX and
WOR.AX.
 GMG.ax has the lowest relative return, whereas the ORG.AX has a modest return.
 CBA.AX and WOR.AX has the highest relative return compared to GMG.AX and ORG.AX
indicating substantial and consistent growth over the three years.
 After reviewing these companies’ returns, the CBA.AX and WOR.AX stocks are profitable and
can give the best returns to investors with moderate risks.

IV. The annual return of the following companies:

 GMG.AX ORG.AX CBA.AX WOR.AX

Annual 20.23% 35.05% 445496.51% 454879.75%

return
(%)

V. The holding period return for each stock:

GMG.AX ORG.AX CBA.AX WOR.AX

Holding 48.46% 105.24% 50.97% 71.45%

period
return (%)
VI.

GMG.AX Investment:

Initial investment: $25,000

Holding Period Return: 48.46%

Final Value of investment: 25000(1+48.46/100)

= $37,115

ORG.AX Investment:

Initial investment: $15,000

Holding Period Return: 105.24%

Final Value of investment: 15000(1+105.24/100)

= $30,786

Total Value of investment at the end of December 2023:

= 37,115+30,786

= $67,901

VII.

Correlation of GMG and ORG are impossible because values are negative.

Correlation between CBA and WOR is:

CORRELATION

Column 1 Column 2

Column 1 1

Column 2 0.381826 1
This value of correlation shows weak positive correlation between CBA and WOR.

VIII.

Correlation is impossible between GMD and ORG is impossible because some percentages
are negative. We calculate correlation between CBA and WOR the value of correlation is
0.3818. This value shows positive linear relationship between CBA and WOR. The strength
of relationship is positive but weak.
James Chen, Akhilesh Ganti and Patrice Williams, (2024) ‘ Risk-return tradeoff : how the investment
principle works’ p1(1). Available at :
https://www.investopedia.com/terms/r/riskreturntradeoff.asp#:~:text=At%20the%20portfolio
%20level%2C%20risk,than%2Ddesired%20potential%20for%20returns.