Covariance (COV ab) = 1/6 (15,682.15) = 2,613.7 Correlation Coefficient = COV ab/a*b a b = 47.27; =70.23 =2,613.7/(47.27)(70.23) = 0.787 CALCULATION OF PORTFOLIO WEIGHTS: FORMULA : [b-(nab*a)] b Wa = + - 2nab*a*b a2 b2 Wb = 1 Wa – WEIGHTS OF WIPRO & OTHER COMPANIES: WIPRO & DR. REDDY = 22.86 a = 46.66 b Nab = -0.184 WA = 46.66 [46.66-(-0.184*)] 2 + 2 2(-0.184)** – WA = 2,373.42 3,092.2615 WA = 0.77 Wb = 1 Wa – Wb = 1- 0.77 = 0.23
Covariance (COV ab) = 1/6 (15,682.15) = 2,613.7 Correlation Coefficient = COV ab/a*b a = 47.27; b =70.23 =2,613.7/(47.27)(70.23) = 0.787 CALCULATION OF PORTFOLIO WEIGHTS: FORMULA : Wa = b [b-(nab*a)] a2 + b2 - 2nab*a*b Wb = 1 – Wa WEIGHTS OF WIPRO & OTHER COMPANIES: WIPRO & DR. REDDY a = 22.86 b = 46.66 Nab = -0.184 WA = 46.66 [46.66-(-0.184*)] 2 + 2 – 2(-0.184)** WA = 2,373.42 3,092.2615 WA = 0.77 Wb = 1 – Wa Wb = 1- 0.77 = 0.23
a-study-on-risk-management.docx