Investment Analysis Report: Evaluating Risk and Return of AGL and ANZ

This report presents an investment analysis comparing two companies, AGL and ANZ, focusing on their share price movements, associated risks, and returns. The analysis includes the calculation of monthly returns, revealing that AGL has a higher return rate than ANZ. Standard deviations are computed to assess the risk involved, with AGL demonstrating a lower standard deviation. The report then proposes a portfolio strategy to minimize risk and maximize returns, suggesting a higher investment in AGL. Correlation coefficients are interpreted to measure the relationship between variables. The study also considers the beta of both companies to understand their share price fluctuation in relation to market changes. The conclusion emphasizes the importance of assessing the identified risks and returns within the designed portfolio to make informed investment decisions. References to supporting literature are included.

RUNNING HEAD: Investment analysis 1
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Investment analysis 2
Table of Contents
Introduction...........................................................................................................................................2
Analysis of share price return, risk of both companies..........................................................................3
Conclusion.............................................................................................................................................4

Investment analysis 3
Introduction
With the ramified economic changes and complex business functioning, each and
every organization has been facing high fluctuation in the share price of their companies. In
this report, share price movement, risk and return associated with two companies named,
AGL and ANZ Company have been taken into consideration.

Investment analysis 4
Analysis of share price return, risk of both companies
Estimated return of both companies
Company
name Monthly return
AGL 2.33%
ANZ .55 %
After evaluating the return of both companies, it is considered that AGL has 2.33% rate of
return which is 1.83% higher as compared to return given by ANZ. It is considered that share
price of AGL is less fluctuated and performing well in market as compared to ANZ Company
(Zhang, Huang and Zhang, 2015.)
Computation of standard deviation
Company
name Standard Deviation
AGL 5%
ANZ 6 %
It reflects the possible risk in share price of both companies. It is considered that AGL has
5% standard deviation which is 1% less as compared to ANZ. It is analysed that standard
deviation of AGL Company is 5% which is less as compared to ANZ deviation and higher
than market index factors. It is considered that minimum return of AGL is -8% and maximum
return of company is 6%. On the other hand, less ANZ Company minimum return is -10%
and maximum return is 12%. It is considered that ANZ Company has high fluctuation in its
return so has higher risk (Sharifzadeh, and Sharif, 2014).
Preparation of portfolio to minimize the risk and increasing the return of company
It is evaluated that Investors should invest 100% return in AGL Company as it is giving
2.67% with the risk of 5%. However, 60% investment in AGL and 40% investment in ANZ
will somehow reduce the associated standard deviation of investment (Wan, et al. 2014).
Interpret the correlation coefficients
It is the technique which used to measure the relation between two or more variables. It is
observed that both correlation coefficients are positive.
Particular of stock Weight
Expected
Return
Standard
Deviation
AGL Ltd 60% 2.33% 5%

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ANZ Ltd 40% 0.55% 6%
W1^2*σ1^2 0.000788528
W2^2*σ2^2 8.9233E-10
2(W1*W2)*r1*σ1*σ2) 0.000335636
Computation of correlation of co-
efficient 25%
Portfolio standard deviation 2.3616E-16
It is evaluated that portfolio of standard deviation is 2.31 which is good indicator for
the investment purpose. It is considered that by investing 60% capital in AGL and 40%
capital in ANZ Ltd Company could easily reduce the value of standards deviation.
In addition to this, the beta of AGL is .37 which reflects that share price will fluctuate by the
same direction by .37 points if market changes by 1 point. On the other hand, Beta of ANZ is
.35 which reflects that share price will fluctuate by the same direction by .35 points if market
changes by 1 point (Götze, Northcott and Schuster, 2015).
Conclusion
After evaluating all the details and share price fluctuation of both companies, it is
considered that portfolio designed is done with view to minimize the risk of selected
companies and increase the overall return of investment. Investors needs to assess whether
the identified risk and return of these selected companies could be undertaken in the designed
portfolio or not.

Investment analysis 6
References
Götze, U., Northcott, D. and Schuster, P., 2015. Capital Budgeting and Investment Decisions.
In Investment Appraisal(pp. 3-26). Springer Berlin Heidelberg.
Sharifzadeh, M. and Sharif, A., 2014. A Probabilistic Capital Budgeting Model for New
Product Development under Stage-Gate Process. Accounting and Finance Research, 4(2),
p.99.
Wan, X., Wang, W., Liu, J. and Tong, T., 2014. Estimating the sample mean and standard
deviation from the sample size, median, range and/or interquartile range. BMC medical
research methodology, 14(1), p.135.
Zhang, Q., Huang, X. and Zhang, C., 2015. A mean-risk index model for uncertain capital
budgeting. Journal of the Operational Research Society, 66(5), pp.761-770.