FBKG-301001 Project: Correlation and Portfolio Design
Project Outline
FBKG-301001 G1
Title: Correlation and Portfolio design
Description:
We have learnt some knowledge of portfolio in week4. However, we choose the stocks randomly, which can make systematic risk higher because of the correlation between some stocks. Therefore, for those investors who want to reduce risk as much as possible, some methods should be taken.
The first value is β, our group decide to introduce a coefficient in CAPM model into portfolio design to help us research correlation. β can reflect the correlations between stocks and market.
We compute many couples of β using linear fitting between stocks and market (low value of β means stock price are more stable facing with the market price change), then some “safe” stocks will be chosen.
Another variable should be cared about as well, the correlation coefficient among stocks. We can calculate all these value and make a correlation coefficient table to find some small values. In this way, we can get the results of which couples of sticks are suitable to appear in the same portfolio
Finally, a list of stocks can be gotton. The following thing is to find some specific portfolio with different distributions, such as best- sharp ratio.
Data Source:
hk.finance.yahoo.com
