Portfolio and Investment Analysis

This document provides an analysis of portfolio management and investment analysis. It covers the risk and return of Next-Era Energy, ABB Group, and Alphabet Inc. stocks, correlation matrix, and portfolio computation. The analysis helps investors make informed decisions about their investments.

Running head: PORTFOLIO AND INVESTMENT ANALYSIS
Portfolio and Investment Analysis
Name of the Student:
Name of the University:
Author’s Note:

2PORTFOLIO AND INVESTMENT ANALYSIS
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Company Analysis.......................................................................................................................3
Risk and Return of Stocks...........................................................................................................5
Correlation Matrix.......................................................................................................................6
Portfolio Computation.................................................................................................................6
Portfolio Analysis........................................................................................................................7
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

3PORTFOLIO AND INVESTMENT ANALYSIS
Introduction
Portfolio Management and Investment analysis is generally done for investors, looking
for better investment return and sustainable growth in there invested wealth. Small Cap Stock
provides investors with better growth prospects, than large cap stocks but at the same time they
are exposed to more volatility. The financial analysis for stocks has been done from the stocks
that are listed in New York Stock Exchange (NYSE). The stocks selected for the purpose of
analysis and portfolio construction were Next-Era Energy (NEE), ABB Group (ABB) and
Alphabet (GOOG) (Maxx Chatsko, 2019). The trend period taken into consideration for the
purpose of analysis is from the period December 2017 – December 2018. In order to better
analyse the stock, risk and return analysis was done for the stock where Risk (Standard
Deviation) and Return generated from each stock will be considered for the purpose of portfolio
construction. In order to construct a well-defined portfolio covering major aspects of investment
consideration, it is important to consider factors beyond risk and return, factors like correlation
will help the investor assess the degree of relativity between the stocks. The weights computation
that were done for the purpose of portfolio construction has been equally weighted portfolio
approach.
Discussion
Company Analysis
Next-Era Energy (NEE): The Next-Era Energy Company operates as an Electric Service
Company having its operations on a world-wide basis through-out the United States and Canada.
The company was founded in the year 1925 and the key product that the company aims to
deliver is generation of electricity. The company is listed in the New York Stock Exchange with
its ticker symbol as (NEE) and is traded as a public listed company. The company is a part of
Dow Jones Industrial Average Component, S&P 500 Component, S&P 500 Index Component
(NextEra Energy, Inc. | Renewable Energy, Solar Energy, Wind Energy, Clean Energy, 2019).
The company is headquartered in the Juno Beach, Florida, United States. The company is
included in Fortune 200 Company that is having an capacity of 45,900 megawatts with an
reported revenue of around $17 billion in the year 2017 and having an employee base of around

4PORTFOLIO AND INVESTMENT ANALYSIS
14,000. In terms of market capitalization the company is said to be one of the biggest company
when compared in terms of market capitalization. In terms of size the reported total assets that
the company has stated in the year 2017 was around US$97.83 Billion. In terms of business
activities the company is one of the largest producer in the Wind and Solar Energy Field and is
regarded as one of the largest capital investors in the field of infrastructure. The company has
planned out a US$50- US$55 Billion of investment planned out for the year 2020-2022. In terms
of electric generation capacity the company has the power and ability of generating around
45,500 Megawatts of Net Generation Capacity.
ABB Group (ABB): ASEA Brown Boveri is an Swedish Multinational Corporation that is
headquarter in Zurich Switzerland, having its operations in the robotics, power, heavy electronic
equipment’s, and in Automated Technology Areas. The company is having a rank of 341st
position in the Fortune Global 500 list selected for the year 2018. The stock is listed in the New
York Stock Exchange with its trading name as ABB (ABB Group - Leading digital technologies
for industry, 2019). The company was founded in the year 1988 after a corporate merger that was
seen between the ASEA Company and Brown, Boveri & Cie Company. The industry in which
the company operates is Electrical Equipment’s and is having, its operation on a world-wide
basis. The net reported revenue of the company for the year 2018 was around US$27.662 Billion
and in terms of size the reported total assets for the company was around US$44.441 Billion in
the year 2018. An all total of 147,000 employees are directly associated with the company.
Alphabet Inc. (GOOG): Alphabet Inc. a multinational American Conglomerate Company that
is headquartered in the Mountain View, California. The company was created through a
corporate restructuring of Google on 2nd of October 2015 whereby it became the parent company
of Google and several former Google Subsidiaries. The company is traded in the NASDAQ
Stock Exchange, and is a key component of S&P 100 and S&P 500 Component (GOOG:
Alphabet Class C - Stock Price, Quote and News – CNBC, 2019). The founders of the company
are Larry Page and Sergey Bin. The operations of the company is spread on a global basis where
the key products that the company offers are primarily in the field of the Technology, Internet
Software, Life Science, Research and Developments and various other goggle products. In terms
of revenue the company has generated around US$136.82 Billion in the year 2018 and the
associated net income for the company was around US$30.74 Billion. In terms of size, the

5PORTFOLIO AND INVESTMENT ANALYSIS
company on a net has a total asset capacity of US$232.8 Billion in the year 2018. An all total of
103,549 Employees are directly associated with the company (Alphabet Inc. 2019).
Risk and Return of Stocks
Investment in stocks and capital market exposes an investor with the changes in the
market prices and the associated market risk that the investor will be primarily affected. Risks
and factors that can cause changes in the market prices are generally in the field of changes in the
business factors, economic factors and various other social and political factors that directly
influences the price movement associated with a stock (Stock Market Risk & Return, 2019). The
stocks that were primarily selected for the purpose of analysis will be considered based on the
risk and return profile of each of the stocks for the time stated period of one year. The stocks
considered for the purpose of analysis were primarily in the field of Next-Era Energy (NEE),
ABB Group (ABB) and Alphabet (GOOG). The trend period taken into consideration for the
purpose of analysis is from the period December 2017 – December 2018.
Next-Era Energy (NEE): The return generated by the Next-Era Energy Stock for the period will
be calculated with the help of collection of monthly average returns that were generated from the
stock for a one year period of time. The return for the NEE stock in the trend period was around
14.52% and the associated risk with the stock was around 16.95%. It is important to note that the
computed return and risk for the stock has been done on an annual basis whereby the monthly
observation for stocks was computed as a percentage return for the stated period of time. On a
risk return basis the stock has given around 0.86 times of return for a single unit of risk taken, the
higher the ratio the better or worth is the stock for investment purpose and wealth creation.
ABB Group (ABB): The return generated by the ABB Group for the trend period was around -
21.15% and the associated risk, which is the standard deviation for the stock was around 24.89%
for the stock. On a risk return ratio the stock has generated around -0.85 of return for a single
unit of risk taken by the investors. The return generated from the stock has been negative and the
same time the associated risk or standard deviation for the stock has been comparatively high
making the investors loose there money or wealth destruction was seen for the trend period
analysed.
Alphabet Inc. (GOOG): The annual return generated by the Alphabet Company has been
around 9.17% and the associated risk that was associated with the company was around 24.78%

6PORTFOLIO AND INVESTMENT ANALYSIS
for the company in the stated point of time. On a risk to return ratio the company on a net has
generated 0.37 times of return for a single unit of risk taken by the investors of the company. The
company has performed well or provided sound return to the investors of the company.
Correlation Matrix
A correlation matrix shows the correlation between each variables that are stated or taken
into consideration. The cells presented below shows or reflects the degree and nature of
correlation between each of the variables that is stated in the box. A correlation matrix shows the
summary of data reflecting the relation or link between the two set of data under the given set of
time frame (What is a Correlation Matrix? | Displayr, 2019). The correlation between all the
variables that were returns from Next-Era Energy (NEE), ABB Group (ABB) and Alphabet
(GOOG) were taken into consideration to assess the degree of relation between the two set of
numbers.
Correlation Matrix
Particulars Next-Era ABB Group Alphabet Inc.
Next-Era 1.00 0.09 -0.13
ABB 0.09 1.00 0.74
Alphabet Inc. -0.13 0.74 1.00
The correlation between the Next-Era and ABB Group was found to be 0.09 reflecting
that the same may not be perfectly correlated but is signalling a positive correlation to a very low
extent. On the other hand, the correlation between the ABB Stock and Alphabet Inc. Stock was
around 0.74 reflecting a positive correlation between the variables. While the correlation
between the Alphabet Inc. and Next-Era stock has been negative giving an all-round correlation
of -0.13 for the combined stock basis. A high correlation or positive correlation shows that the
changes in one of the variable can be well explained with the changes in the other variables. On
the other hand, a negative or low correlation for the stock shows an opposite movement between
the selected variables. The correlation between the Alphabet Inc. and Next-Era stock is
considerably negative reflecting a better component for portfolio investment.
Portfolio Computation
The computation of portfolio will be done by selecting the above three stocks that will be
considered for the purpose of investment whereby the selected three stocks will be considered for

7PORTFOLIO AND INVESTMENT ANALYSIS
the portfolio based on an equally weighted portfolio where the portfolio will be considered on a
50% weightage given to each of the stock (Leydesdorff, Heimeriks & Rotolo, 2016).
Portfolio 1: The stocks that were selected for the purpose of portfolio construction will be
primarily NEE and ABB stock that will be considered for the purpose of analysis. The return
generated from the Portfolio was around – 3.32% and the associated level of risk for the risk was
around 20.92% (NextEra Energy Resources, 2019).
Portfolio 1 Weight Return Risk Analysis
NEE 50% 14.52% 16.95% Portfolio 1 Return -3.32%
ABB 50% -21.15% 24.89% Portfolio 1 Risk
20.92
%
Portfolio 2: The stocks that were selected for the purpose of portfolio construction will be
primarily NEE and GOOG stock that will be considered for the purpose of analysis. The
portfolio was created with the help of key stocks such as NEE and GOOG which gave a return of
11.85% and the risk for the portfolio was around 20.87% (GmbH, 2019).
Portfolio 1 Weight Return Risk Analysis
NEE 50% 14.52% 16.95% Portfolio 2 Return
11.85
%
GOOG 50% 9.17% 24.78% Portfolio 2 Risk
20.87
%
Portfolio 3: The stocks that were selected for the purpose of portfolio construction will be
primarily ABB and GOOG stock that will be considered for the purpose of analysis. The annual
return generated from the Portfolio was around – 5.59% and the associated level of risk for the
risk was around 24.84% (Oliveira, 2019).
Portfolio 3 Weight Return Risk Analysis
ABB 50% -21.15% 24.89% Portfolio 3 Return -5.99%
GOOG 50% 9.17% 24.78% Portfolio 3 Risk
24.84
%

8PORTFOLIO AND INVESTMENT ANALYSIS
Portfolio Analysis
The analysis of the constructed portfolio will be done based on the stocks selected and
the associated level of risk and return generated in the given set of time frame for the above
analysed stocks. The portfolio were created and based on an equally weighted portfolio where
the portfolio will be created on a 50% weightage given to each of the stock (Ouenniche et al.,
2016).
Portfolio 1: The portfolio 1 was created by taking both the NEE and ABB stock on an equal
weightage basis given to each of the stock. The return generated from the stock was around -
3.32% and the associated level of risk for the stock was around 20.92% the portfolio might not
be suitable for the investors as the given set of stocks is generating negative set of returns and
may distort the wealth creation opportunity for the investors (ABB Ltd. - Stock Snapshot - Value
Research Online, 2019). The best performer in the portfolio was NEE stock giving an return of
14.52% and on the other hand side the ABB stock has provided a -21.55% return.
Portfolio 2: The portfolio 2 was created with the help of the NEE and GOOG stock where the
return generated from the portfolio was around 11.85% and the associated level of risk for the
portfolio was around 20.87%. The portfolio may be considered by the investor as the same has
generated a significant wealth for the investors of the company in the stated period of time along
with the predefined level of risk that is directly associated with the company. The best performer
in the portfolio was NEE stock giving a return of 14.52% and on the other hand side the GOOG
stock has provided a 9.17% return, making the overall portfolio return to 11.85%.
Portfolio 3: Portfolio 3 was created with the help of the key stocks such as ABB and GOOG
stocks that primarily would be taken into consideration for the purpose of analysis. The return
generated from the portfolio was around -5.99% and the associated level of risk for the portfolio
was around 24.84% for the stock in the given state of time period analysed for the stock
(Chamaria, 2019). The portfolio constructed may not be suitable for the investors as the same has
not only provided a negative return to the investor but is also having a high standard deviation or
risk which can destroy the wealth of the investors. The best performer in the portfolio was ABB
stock giving a return of -21.15% and on the other hand side the GOOG stock has provided a
9.17% return making the overall portfolio return to -5.99%.

9PORTFOLIO AND INVESTMENT ANALYSIS
Conclusion
Analysis of the stocks based on a risk return basis helped us in the construction of
portfolio and understand the various aspect of the return both from an individual and as well as
from a portfolio approach. On the one hand side, individual stock investment does not provide
the benefit of diversification to the investor a portfolio approach allows an investor allows the
investor to take specified weights in the given set of stocks based on the forecast and assumption
one has on the selected stocks. The analysis of the stocks concluded that the NEE stock has
provided the highest set of return to the investors and from a portfolio perspective the Portfolio 2
was considered to be as one of the best option available for the investor for the purpose of
investment. It is crucial to note that the weights selected for the purpose of analysis has been
around 50% for each of the stock in the portfolio if a slight changes or modification could be
done based on the expectation and assumptions that an investor makes in the perspective of the
stock will be benefiting the investor in generating active return with the help of active
management for the investors.

10PORTFOLIO AND INVESTMENT ANALYSIS
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11PORTFOLIO AND INVESTMENT ANALYSIS
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