Analyzing Market Returns and Risk: Finance Assignment

This assignment analyzes the financial performance and risk associated with investing in Royal Bank of Canada (RY) stock. It begins by calculating and presenting the average daily, monthly, and yearly market returns. The analysis then delves into the annual standard deviation and total risk, followed by an assessment of systematic and unsystematic risks. The student provides justifications for selecting the stock as a potential investment, highlighting the balance between returns and risk, including the beta and unsystematic risk. Furthermore, the assignment discusses the rationale behind investing in the stock, considering its high beta and potential for high returns, recommending a limited allocation within a diversified portfolio. The assignment references academic sources to support the analysis and investment decisions. The student has used the Yahoo Finance historical data to analyze the stock.

Running head: MANAGING FINANCE
Managing Finance
Name of the Student:
Name of the University:
Authors Note:

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MANAGING FINANCE
Table of Contents
1. Stating the yearly market returns, monthly market returns, and daily market returns:..........2
2. Depicting the annual standard deviation and Total risk:........................................................2
3. Depicting the overall Systematic risk for the stock:..............................................................2
4. Depicting the overall Unsystematic risk of the stock:...........................................................2
5a. Stating the overall reason behind selecting the stock as good investment:..........................2
5b. Providing all the relevant reason behind investment in the stock:.......................................3
Reference and Bibliographh:......................................................................................................4

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MANAGING FINANCE
1. Stating the yearly market returns, monthly market returns, and daily market
returns:
Refer to excel file
Average daily returns 0.03%
Average monthly returns 0.66%
Average yearly returns 7.98%
2. Depicting the annual standard deviation and Total risk:
Refer to excel file
Average yearly standard deviation 1.02%
3. Depicting the overall Systematic risk for the stock:
Beta 0.777
4. Depicting the overall Unsystematic risk of the stock:
Unsystematic risk 0.0085
5a. Stating the overall reason behind selecting the stock as good investment:
The main reason behind the selection of the stock is mainly the overall returns and
reducing unsystematic risk. The overall return that is provided on yearly average basis is

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MANAGING FINANCE
mainly at 7.98%, which is relatively adequate and the unsystematic risk is at 0.0085.
Therefore, it could be understood that the return is high and unsystematic risk is relatively
low, which is adequate for investment purposes. However, there are some negative points,
which could be minimised by using adequate diversification method. The overall beta of the
company is mainly at 0.777, while the yearly average standard deviation is at 1.02%. This
relevant increment in the risk of investment could mainly be reduced with the help of
diversification. Kiselakova et al., (2015) stated that constriction of portfolio is mainly
conducted to reduce the systematic risk, where high return is estimated, while low risk is
associated with the investment.
5b. Providing all the relevant reason behind investment in the stock:
The share of Royal Bank of Canada mainly has high beta, which make the overall
investment in the stock is a risky endeavour. In addition, the rising stock involved in the
investments mainly reduces its overall weight in the portfolio. Furthermore, the stock could
only be added due to the high return that is provided annually. Therefore, only 25% of the
total capital could be conducted in the company, as it has been providing constant return on
yearly basis. Park, Song & Lee (2017) mentioned that using the diversified portfolio directly
allows the investor to hedge its risk and generate targeted returns from investment.

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MANAGING FINANCE
Reference and Bibliographh:
Kiselakova, D., Horvathova, J., Sofrankova, B., & Soltes, M. (2015). Analysis of risks and
their impact on enterprise performance by creating Enterprise Risk Model. Polish
Journal of Management Studies, 11.
Park, S., Song, S., & Lee, S. (2017). Corporate social responsibility and systematic risk of
restaurant firms: The moderating role of geographical diversification. Tourism
Management, 59, 610-620.
RY Historical prices | Royal Bank Of Canada Stock - Yahoo Finance.
(2017). Au.finance.yahoo.com. Retrieved 31 October 2017, from
https://au.finance.yahoo.com/quote/RY/history?
period1=1351621800&period2=1509388200&interval=1d&filter=history&frequency
=1d