The aim of this assignment is to elaborate a report describing stock market price evolution of two publicly traded companies. Choose two well-known companies listed on the New York stock exchange (or any other stock exchange). For the sake of this exercise please select these companies from two different sectors. Find the data for its daily stock price for the period of at least 5 last years (you need to use the same time span for both companies). I recommend to use the finance.yahoo.com web-page that allow to download a data for publicly traded companies for free. You will need to convert stock prices into returns as than the analysis for two companies will make sense – the easiest way to calculate the daily return is to take: closing price of day t / closing price of day (t-1) – the previous day. Than divide the difference by the price of the previous day to get the return in % terms. In such way you will generate the time series of daily returns for these two companies. Now please prepare a busines report that should be supported with all the necessary analysis (plots, tables etc.) and the excel will that will also form a part of the assignment.
Question1: Present the graph of both the daily price evolution and daily returns – comment on the price changes and the daily returns. Do you observe any extreme changes? What would be an explanation for them (please support any facts that can support your answer)
Please prepare the measures of the central tendency, dispersion and association of variables and based on this answer the following questions:
Q2: What is the mean stock price return for both companies? What is the meaning of the number you have obtained? Please compare the results obtained for both companies
Q3: What is the median stock price return for both companies? What is the meaning of the number you have obtained? Please compare the results obtained for both companies
Q4 Construct a frequency distribution of your choice (the intervals should be chosen by you for showing the distribution of the data in the best way) and percent frequency distribution of the stock price return for the indicated period for both companies. Evaluate the results and compare.
Q5: What is the most frequent stock price return range you observe for each company? Evaluate the results and compare
Q6: What is the variance and the standard deviation of the stock price returns for the indicated period for both companies? Evaluate the results and compare. What can we say about the volatility of the stock price returns for these two companies
Q7: Please think about the relationship between the stock prices (or stock price returns) of both companies. Would you expect the correlation between these two companies to be positive / negative? Strong or weak? Please calculate the correlation coefficient. What is the meaning of the results you have obtained? Is that what you have expected?
Q8: If the historical average stock market return is 10% with a standard deviation of about 15% (S&P 500), using the previous data you have provided, would you invest in any of these companies? Please annualize the average daily returns and the daily standard deviation to achieve quantities comparable (multiply the average daily return by 255 and the average daily standard deviation by sqrt(255), aprox.by 16 times).
Please remember to support your analysis with all the necessary graph
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