Author(s)

Yuhui Liu

Corresponding Author

Yuhui Liu

ABSTRACT

The performance of stocks and portfolios is a major concern for financial analysts as well as stock traders. These analyses involve the consideration of the stock prices in the financial markets over a period of time; in such analyses different statistical tools are used to conduct a comprehensive analysis. The study evaluated the performance of a portfolio from 10 stocks. The portfolio was constructed from different companies occupying various sectors. The study first examined the performance of the individual stocks over a five-year period (March, 2016 to March, 2021) which acted as a basis of performance analysis. The portfolio was then analyzed using descriptive statistics by looking at returns, variance, standard deviation, and Sharpe ratio. Covariance analysis was then carried out to show the relationship between the different stocks. The results indicated that investors or analysts can use different approaches to arrive at their desired investment portfolio. The analysis showed that the minimum variance portfolio is suitable for risk averse investors since it results in low variance. On the other hand, the optimal risky portfolio is suitable for risk loving investors since it results in the highest risk adjusted returns.

KEYWORDS

Standard deviation, Correlation, Sharpe ratio, portfolio, portfolio construction