Posted: December 21st, 2014

Case Study: Risk and Return Calculation

Case Study: Risk and Return Calculation

Order Description

See Attached file.

Introduction:
Risk is an important concept in financial analysis, especially in terms of how it affects security prices and rates
of return. The risk and return tradeoff is defined as the principle that potential return rises with an increase in
risk. Low levels of uncertainty (low-risk) are associated with low potential returns, whereas high levels of
uncertainty (high-risk) are associated with high potential returns. In today’s information technology world, real
time financial data are readily available via the Internet. Students and investors now have easy access to on-line
databases. Student will be able to demonstrate how to measure a risk and return for a stock and for a portfolio
over time.
THE RISK AND RETURN CALCULATION
Students will download the relevant stock prices for two companies from the Internet and perform risk and
return calculation for the selected companies. Since the concept risk and return tradeoff is as much an art as it is
a science, students must combine the selected stocks in a portfolio and then calculate the portfolio’s risk and
return.
The purpose of this case study is to provide students with the opportunity to:
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retrieve real time financial data via the Web;
Calculate the risk and return of selected stocks;
Construct a portfolio
Calculate the portfolio’s risk and return.
Practice technology, both in calculating the returns and risks ( through excel processing) and in
presentation (through giving some chart in order to explain the variance, the tendency of two stocks to
move together…)
Students are instructed to follow the path shown below to retrieve the risk and return for the selected company
via Doha Stock Market.
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Go to Qatar stock exchange website: www.qe.com.qa
From the menu, click on market statistics then Trading reports
Choose the 2013 and 2012 monthly trading reports and hit submit, and then download the prices.(you
need the data for 2 years: 2013-2012)
Technical Information:
Each student will perform the risk and return calculation based upon the following concepts:
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Holding period return or rate of return
Asset and portfolio ’s expected return and variance using historical data
The correlation and the covariance in returns between the two stocks
Finally based on the investors’ attitude toward the risk-return tradeoff, the student will justify which asset Does
he/she prefer?

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