Portfolio Analysis Report for Desklib

Running head:REPORT FOR PORTFOLIO ANALYSIS
Report for Portfolio Analysis
Name of the Student:
Name of the University:
Authors Note:

REPORT FOR PORTFOLIO ANALYSIS
1
Table of Contents
Company Background:...............................................................................................................2
Section A: Two asset portfolio...................................................................................................2
Section B: Optimal portfolio......................................................................................................5
Section C: Cost of capital...........................................................................................................8
Conclusion:..............................................................................................................................10
Reference and Bibliography:....................................................................................................12
Appendices:..............................................................................................................................14

REPORT FOR PORTFOLIO ANALYSIS
2
Company Background:
The two-asset portfolio is calculated by using Barclays and Vodafone Group, as they
are among the top stock market movers. Barclays Plc is one of the largest multinational
investment banks in United Kingdom. The company is organised into four core businesses
such as personal banking, corporate banking, wealth management and investment
management. The company has been generating high level of income over the period of time,
where a net income of £0.894 billion has been obtained during 2017 (Home.barclays 2019).
Vodafone Group Plc is a British multinational telecommunication company in United
Kingdom. In addition, the organisation has obtained a net income of £2.151 billion in 2018,
which can allow the investors to generate high level of income over the period
(Vodafone.com 2019). The operations of the organisation have mainly improved over the
period, where the market capitalisation is at the level of £52.5 billion.The investors can
conducted investments in FTSE 100 companies by analysing the return and risk attributes of
the organisation.
Section A: Two asset portfolio
Portfolio Proportion: Barclays 50.00%
Year Barclays Vodafone Group Portfolio Portfolio Proportion: Vodafone Group 50.0%
2014 -11.05% -28.23% -19.64%
2015 -10.65% -0.74% -5.70%
2016 2.06% -10.06% -4.00%
2017 -9.55% 16.20% 3.33%
2018 -4.08% -20.39% -12.24%
0
Average Return -6.65% -8.65% -7.65%
Median Return -9.55% -10.06% -5.70%
Variance of Returns 0.32% 3.01% 0.76%
Standard Deviation of Returns 5.62% 17.35% 8.70%
Covariance of returns Cov (r_AAPL, r_SAM)
Correlation of returns, ρ
Portfolio: Barclays and Vodafone Group
Annual Returns
-0.15%
-15.39%

REPORT FOR PORTFOLIO ANALYSIS
3
The calculation indicates the valuation of two-portfolio asset, which depicts the
income that will be generated from investment. Adequate measure is used by the investors for
detecting the risk and return capabilities of the portfolio. In addition, different calculations
are mainly conducted to identify the level of income, which can be generated from the
portfolio over the investment period. Fagereng, Gottlieb and Guiso (2017) mentioned that
with the help of adequatecalculation investors are able to formulate a portfolio, which has
low risk and high returns from investment.
The data highlighted in the calculation highlights the returns and risk associated with
each organisation. In addition, from the evaluation, it is noticed that the annualized returns of
both Barclays and Vodafone Group has been used from 2014 to 2018 in the calculation. The
values of average returns, median returns, variance returns and standard deviation returns is
used by investors to formulate the two-stock portfolio, which can reduce risk and increase
returns. He, Kelly and Manela (2017) mentioned that with the help of returns calculation, the
volatility and average expected returns of the stock is determined by the investors, which help
them to make appropriateinvestment decisions.
The composition of the portfolio used in the calculation is 50:50, which has allowed
the portfolio to mitigate the risk from investment. The relevant calculation of the portfolio
spots the level of returns, which is generated from the formulated portfolio. Moreover, from
the evaluation it can be noticed that the average return of the portfolio is calculated at the
levels of -7.65%. The variance is at 0.76% and standard deviation of the return is at 8.70%.
The correlation and covariance of the stock returns are also calculated for identifying the
impact it might have on the portfolio return and discover the minimum variance portfolio
(Pagliari 2017).The risk attributes of Barclay is lower than portfolio, which is 5.62%, while
Vodafone Group has high level of risk amounting to 17.35%.