International Finance: Calculating Returns, Comparing Performance, and Analyzing Currency Effects

This document provides an analysis of international finance, including the calculation of returns from selected companies in a portfolio, evaluation of portfolio returns, comparison of the performance of Wesfarmers and BHP with ASX, analysis of the correlation between SPK and GNE, and examination of the effect of USD/AUD on the valuation of WES and BHP.

Running head: INTERNATIONAL FINANCE
International Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
1.a) Calculating the returns from the selected companies in the portfolio:...............................2
1.b) Calculating and evaluating returns of the portfolio:...........................................................3
2) Comparing performance of Wesfarmers and BHP with ASX:..............................................4
3.a) SPK and GNE is compared with New Zealand Index:.......................................................6
3.b) Correlation is identified in SPK and GNE:........................................................................7
3.c) SPK and GNE compared with Australian market:..............................................................8
4.a) Effect of USD/AUD is analysed on valuation of WES:...................................................10
4.b) Understanding the implication of USD/AUD on valuation of BHP:................................10
5.a) Effect of NZD/AUD is analysed on valuation of SPK:....................................................11
5.b) Effect of USD/AUD is analysed on valuation of GNE:...................................................11
References:...............................................................................................................................12

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1.a) Calculating the returns from the selected companies in the portfolio:

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Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 31.890 0.950% Share progress is viewed by Analyst
BHP Billiton Limited 31.560 -2.472% BHP facing problems from China
Spark New Zealand Limited 3.840 -2.538% Unlimited Mobile plan improved
Genesis Energy Limited 2.320 -2.521% Genesis provides presentation
Portfolio Average -1.645%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 31.590 -0.941% Impact from Index
BHP Billiton Limited 30.690 -2.757% China iron ore imports declines
Spark New Zealand Limited 3.960 3.125% Emirates Team to use Spark's 5G Network
Genesis Energy Limited 2.360 1.724% Disclosures are ongoing
Portfolio Average 0.288%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 31.950 1.140% Share progress is viewed by Analyst
BHP Billiton Limited 31.180 1.597% Buying sphere from BHP Insiders
Spark New Zealand Limited 4.010 1.263% Spark adds more COW’s to its herd
Genesis Energy Limited 2.400 1.695% Disclosures notice
Portfolio Average 1.423%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 31.280 -2.097% Impact from Index
BHP Billiton Limited 32.400 3.913% High dividends announced
Spark New Zealand Limited 4.010 0.000% Southern Cross Cables NEXT Project
Genesis Energy Limited 2.450 2.083% Disclosures notice
Portfolio Average 0.975%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 31.430 0.480% Negative impact from Coles
BHP Billiton Limited 33.360 2.963% Analyst reports shares to hit $40
Spark New Zealand Limited 3.970 -0.998% Spark paves the way to smart street
Genesis Energy Limited 2.440 -0.408% D&O Ongoing Disclosure Notices
Portfolio Average 0.509%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 32.530 3.500% Impact from Index
BHP Billiton Limited 33.950 1.769% Buy rating made by Goldman
Spark New Zealand Limited 4.010 1.008% Impact from Index
Genesis Energy Limited 2.500 2.459% Impact from Index
Portfolio Average 2.184%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 32.080 -1.383% Impact from Index
BHP Billiton Limited 33.380 -1.679% Decline in iron ore prices is expected
Spark New Zealand Limited 3.960 -1.247% Impact from Index
Genesis Energy Limited 2.440 -2.400% Impact from Index
Portfolio Average -1.677%
Name of the Company Closing Price (Weekly) Percentage Change News
Wesfarmers Limited 31.950 -0.405% Share progress is viewed by Analyst
BHP Billiton Limited 32.790 -1.768% Ex-dividend for $1.43 per share
Spark New Zealand Limited 3.940 -0.505% Impact from Index
Genesis Energy Limited 2.450 0.410% Interim Result of FY19
Portfolio Average -0.567%
Week 3 07-12-2018
Week 4 14-12-2018
Week 8 11-01-2019
Week 5 21-12-2018
Week 6 28-12-2018
Week 7 04-01-2019
Week 1 23-11-2018
Week 2 30-11-2018

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The calculations conducted in the above table directly represent the overall written
that has been generated from the portfolio. The average portfolio value on each week has
been identified to understand the level of returns that can be generated by the selected stocks.
Furthermore, relevant news has been evaluated for detecting the price movement of the
stocks for the period of 8-weeks. The above table represents the changing returns that are
provided by the portfolio on a particular week. This can eventually help in understanding the
level of fluctuations in price patterns of the stocks. In this context, Arthur (2018) mentioned
that without adequate research investors cannot formulate an adequate portfolio, which can
mitigate risk and generate returns on the same time.
1.b) Calculating and evaluating returns of the portfolio:
Stock Buying Price Selling Price Return
Wesfarmers Limited 31.6 32.0 1.1%
BHP Billiton Limited 32.4 32.8 1.3%
Spark New Zealand
Limited
3.9 3.9 0.0%
Genesis Energy Limited 2.4 2.5 2.9%
Portfolio returns 1.4%
Portfolio returns for the period of 8-weeks is relatively calculated in the above table,
which is at the levels of 1.4 %. Returns of the portfolio are relatively not adequate, as one of
the selected stocks did not produce any kind of returns during the investment period.
Moreover, the highest returns were provided from a stock, which was only at the levels of
2.9%. The selection of the stocks could have been better, which might eventually increase the
level of returns that was generated from the investment. The stocks that were chosen for

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investment did not provide abnormal returns during the investment period, as the investment
was relatively for short term. The selected companies are relatively considered growth stocks,
which allow investors to generate higher income in form of dividends and residing share
price over a longer period of time. Asker, Farre-Mensa and Ljungqvist (2014) argued that
formulation of the portfolio is essential as investments, which generate lower returns and
have high risk, negatively impact the capital investment of the investors.
2) Comparing performance of Wesfarmers and BHP with ASX:
Figure 1: ASX Index compared with WES
(Source: Au.finance.yahoo.com 2019)
The analysis directly indicates that the price action of Wesfarmers acts relatively
opposite to the Australian index, which can be seen in the above figure. After evaluating the
figure, it is also seen that when the prices of Wesfarmers rises, the Australian index value
declines and vice versa, which states that the share price value of the organization is not
affected by the capital market. Therefore, having the stock in the portfolio would eventually
help the investor in mitigating the risk of market index.

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Figure 2: ASX Index compared with BHP
(Source: Au.finance.yahoo.com 2019)
After analyzing the price movement of BHP Billiton and the Australian index, it could
be identified that they both have contradictory price actions. Revaluation directory indicates
when the Australian index value decline the overall prices of BHP Billiton increases in value,
which directly indicates their contradictory price action movement. Therefore, it could be
understood that the Australian index is not driving the prices of BHP Billiton while the
organization is acting as a gateway for investors to reduce the negative impact from capital
market. The price action indicates that the share price of BHP Billiton continuously rose
during the period when the Australian index was incurring losses.

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3.a) SPK and GNE is compared with New Zealand Index:
Figure 3: New Zealand Index compared with SPK
(Source: Au.finance.yahoo.com 2019)
Adequate comparison has been conducted in the above figure between the New
Zealand index and share price of Spark New Zealand Limited. From the valuation, it is
indicated that the New Zealand Index is not influence the share price movement of Spark, as
whenever the index value increase overall value of Spark declined. However, when the
market index of New Zealand declined the share price value of Spark increased, which can be
seen in the above figure. This directly indicates that the valuation of the company is not
dependent on the price action of New Zealand Index.

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Figure 4: New Zealand Index compared with GNE
(Source: Au.finance.yahoo.com 2019)
After the evaluation, it could be identified that the returns generated by Genesis
Energy Limited is a relatively similar to the New Zealand index. This directly indicates that
the share price value of Genesis Energy Limited dependent on the market index as whenever
the value of the index the client the share price of the organization dropped. Therefore, it
could be understood that Genesis Energy Limited has a positive price action movement
against the New Zealand market.
3.b) Correlation is identified in SPK and GNE:
Figure 5: SPK and GNE correlation is analysed
(Source: Au.finance.yahoo.com 2019)
The above figure highlights the correlation between Spark and Genesis Energy
Limited for the period of lesson 8-weeks. From the above figure, it could be understood that
share price movement of the company is a relatively similar, another company directly
supports where the reclining value of one organization. This high correlation between both
the stocks directly indicates the returns that can be generated from invest. However, with the

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high correlation value the portfolio does not adequately diversify the disk from the capital
market. In this context, Gurgun and Unalmış (2014) stated that investors should use adequate
correlation value to formulate the portfolio, which would eventually help in mitigating the
risk and increasing the impact of diversification.
3.c) SPK and GNE compared with Australian market:
Figure 6: ASX Index compared with SPK
(Source: Au.finance.yahoo.com 2019)
The above figure directly evaluates the price action of Spark New Zealand Limited
and the Australian index, which is relatively compared to identify similarity in price
movement. How about from the evaluation, it can be identified that the share price value of
Spark New Zealand Limited does not change with the ASX index, as seen in the above
figure. Moreover, the analysis indicates that when the share price value of Spark New
Zealand increases the overall Australian market decline in value. This is the result where the
overall chart displays the price action on an inverse condition. Li (2014) argued that investors
having stocks that behave alternately to the market index would directly have an impact when
capital market is on the rise.

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Figure 7: ASX Index compared with GNE
(Source: Au.finance.yahoo.com 2019)
Share price value of Genius Energy Limited has also portrayed an adverse price
movement in comparison to the Australian index. From the figure, it could be detected that
when the prices of assets index increases the overall value of Genesis Energy Limited
decline. This is the main reason why there is a significant difference in the lines produced in
the above figure. The rising values Australian index has negative influence on the price
action of Genesis Energy Limited. Therefore, it could be understood that Genesis Energy
Limited has negative will flow from the ASX market, which can be used by investors to
decline their portfolio risk.

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4.a) Effect of USD/AUD is analysed on valuation of WES:
Figure 8: USD with AUD
(Source: Oanda.com 2019)
Wesfarmers in the international market relatively conducts the operation in American
Dollars, which is why the above figure directly value which the currency valuation of AUD
and USD. This comparison directly helps identify whether the currency market influences the
price movement of Wesfarmers. The revenue generated by Wesfarmers in the international
market is relatively low in comparison to the home country sales. This is the main reason
why the currency market does not influence the share price value of the organization.
4.b) Understanding the implication of USD/AUD on valuation of BHP:
After validating the price action movement of BHP Billiton with the currency market
could be identified that the organization is directly influenced by USD/AUD valuation. The
operations of the organization are relatively conducted in the international market where both
the revenues and expenses are influenced by USD. Therefore, the declining values of
USD/AUD will directly affect their share price in the market.

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5.a) Effect of NZD/AUD is analysed on valuation of SPK:
Figure 9: Currency exchange New Zealand dollar with AUD
(Source: Oanda.com, 2019)
The main operations of Spark are relatively conducted in New Zealand where NZD is
used for the operations. Hence, the alterations in NZD/AUD will directly have impact on the
share price of Spark New Zealand Limited. This is the main reason why the share price value
of organization is comparable to the fluctuations in the currency market.
5.b) Effect of USD/AUD is analysed on valuation of GNE:
The operations of Genesis Energy Limited are mainly conducted in New Zealand
where New Zealand dollar is used for the transaction purposes. Hence, any kind of alterations
in the overall currency market directly have negative impact on the share value of the
organization. This is the main reason why the comparison between the currency values of
NZD/AUD can be conducted with the price movement of Genesis Energy Limited. Hence, it
would be understood that the currency market influences the share price value of foreign
companies that are listed in ASX.

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References:
Arthur, W.B., 2018. Asset pricing under endogenous expectations in an artificial stock
market. In The economy as an evolving complex system II (pp. 31-60). CRC Press.
Asker, J., Farre-Mensa, J. and Ljungqvist, A., 2014. Corporate investment and stock market
listing: A puzzle?. The Review of Financial Studies, 28(2), pp.342-390.
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/world-indices [Accessed 13 Jan. 2019].
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/SPK.AX/?p=SPK.AX [Accessed 13 Jan. 2019].
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/GNE.AX/?p=GNE.AX [Accessed 13 Jan. 2019].
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/BHP.AX/?p=BHP.AX [Accessed 13 Jan. 2019].
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/WES.AX/?p=WES.AX [Accessed 13 Jan. 2019].
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/SPK.AX/?p=SPK.AX [Accessed 13 Jan. 2019].
Gürgün, G. and Ünalmış, İ., 2014. Is gold a safe haven against equity market investment in
emerging and developing countries?. Finance Research Letters, 11(4), pp.341-348.
Li, G., 2014. Information sharing and stock market participation: Evidence from extended
families. Review of Economics and Statistics, 96(1), pp.151-160.

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Oanda.com. 2019. Historical Currency Converter | OANDA. [online] Available at:
https://www.oanda.com/fx-for-business/historical-rates?
view=graph&base=USD&quote=EUR&duration=30 [Accessed 13 Jan. 2019].
Oanda.com. 2019. Historical Currency Converter | OANDA. [online] Available at:
https://www.oanda.com/fx-for-business/historical-rates?
view=graph&base=USD&quote=EUR&duration=30 [Accessed 13 Jan. 2019].