Financial Analysis of Stock Returns and Portfolio Creation

This finance assignment analyzes the returns of three stocks (WBC.AX, CBA.AX, and AORD) using various financial metrics. The solution calculates holding period returns, average and annual holding period returns, and standard deviation. It includes a scatter plot to visualize the data and determines the CAPM return and SML line. The assignment culminates in portfolio creation and a recommendation for investment based on the analysis, suggesting that investment in all three options is viable due to the correlation between risk and return. The document utilizes data from Yahoo Finance and provides a comprehensive overview of the financial analysis process.

Running head: ACCOUNTING & FINANCIAL
Accounting & Financial
Name of the Student:
Name of the University:
Authors Note:

ACCOUNTING & FINANCIAL 2
Table of Contents
Question 4:.................................................................................................................................3
Answer to 1): Holding period return of the three stocks............................................................3
Answer to 2): Average Holding period return...........................................................................4
Answer to 3): Annual Holding period return.............................................................................5
Answer to 4): Standard deviation...............................................................................................5
Answer to 5): Scatter Plot..........................................................................................................5
Answer to 6): CAPM Return......................................................................................................6
Answer to 7): SML Line............................................................................................................6
Answer to 8): Portfolio Creation................................................................................................6
Answer to 9): Recommendation.................................................................................................7
Bibliography:..............................................................................................................................8

ACCOUNTING & FINANCIAL 3
Question 4:
Answer to 1): Holding period return of the three stocks

ACCOUNTING & FINANCIAL 4
6/1/2017
7/1/2017
8/1/2017
9/1/2017
10/1/2017
11/1/2017
12/1/2017
1/1/2018
2/1/2018
3/1/2018
4/1/2018
5/1/2018
-12.00%
-10.00%
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
Return of Three A sset
WBC.AX CBA.AX AORD
Answer to 2): Average Holding period return
Particulars
WBC.A
X CBA.AX AORD
Average Holding period return -0.479% -0.698% 0.697
%

ACCOUNTING & FINANCIAL 5
Answer to 3): Annual Holding period return
Particulars WBC.AX CBA.AX AORD
Annual Holding period
return
-0.479% * 12 -0.698% * 12 0.697% * 12
Annual Holding period
return
-5.746% -8.377% 8.368%
Answer to 4): Standard deviation
Particulars WBC.AX CBA.AX AORD
Standard deviation 3.493% 4.051% 2.086%
Answer to 5): Scatter Plot
1.500% 2.000% 2.500% 3.000% 3.500% 4.000% 4.500%
-10.000%
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
8.368%
-8.377%
-5.746%
Scatter plot
WBC.AX CBA.AX AORD

ACCOUNTING & FINANCIAL 6
Answer to 6): CAPM Return
Answer to 7): SML Line
0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000
0.0000%
1.0000%
2.0000%
3.0000%
4.0000%
5.0000%
6.0000%
7.0000%
SML Line
Return Linear (Return) WBC.AX CBA.AX
Answer to 8): Portfolio Creation

ACCOUNTING & FINANCIAL 7
Answer to 9): Recommendation
From the relevant calculation it can be detected that investment in all the three-
investment option is viable, as the return in correlated with the risk, higher returns will
increase the risk from investment. Thus, investment in Westpac Banking Corporation
(WBC.AX), Commonwealth Bank of Australia (CBA.AX), and Portfolio can be conducted
by the investor.

ACCOUNTING & FINANCIAL 8
Bibliography:
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 18 December 2018, from
https://au.finance.yahoo.com/quote/CBA.AX/history?
period1=1464719400&period2=1498761000&interval=1mo&filter=history&frequenc
y=1mo
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 18 December 2018, from
https://au.finance.yahoo.com/quote/WBC.AX/history?
period1=1464719400&period2=1498761000&interval=1mo&filter=history&frequenc
y=1mo