**Question: Two stock prices for six days are given below.**

Price A | Price B |
---|---|

45 | 60 |

50 | 65 |

54 | 61 |

48 | 63 |

41 | 61 |

45 | 50 |

**Calculate: 1. Average return of both stock **

**2. Standard deviation of each stock **

**3. Coefficient of Variation of each stock **

**4. Which stock is less risky based on Standard deviation? **

**5. Which stock you will select based on Coefficient of variation?**

**Solution:**

For 1, 2 & 3:

Price -A (x) | (x-Avg Return) | (x-Avg Return)^2 | |
---|---|---|---|

45 | -2.166666667 | 4.694444444 | |

50 | 2.833333333 | 8.027777778 | |

54 | 6.833333333 | 46.69444444 | |

48 | 0.833333333 | 0.694444444 | |

41 | -6.166666667 | 38.02777778 | |

45 | -2.166666667 | 4.694444444 | |

Sum | 283 | Sum | 102.8333333 |

No. | 6 | No. | 6 |

Average return (283/6) | 47.16666667 | Variance (102.8333/6) | 17.13888889 |

S.D. (Sq. root of 17.138889) | 4.139914116 | ||

Co-efficient of Variation (4.1399/47.1666)*100 | 8.78% |

Price -B (x) | (x-Avg Return) | (x-Avg Return)^2 | |
---|---|---|---|

60 | 0 | 0 | |

65 | 5 | 25 | |

61 | 1 | 1 | |

63 | 3 | 9 | |

61 | 1 | 1 | |

50 | -10 | 100 | |

Sum | 360 | Sum | 136 |

No. | 6 | No. | 6 |

Average return (283/6) | 60 | Variance (102.8333/6) | 22.66666667 |

S.D. (Sq. root of 22.666666) | 4.760952286 | ||

Co-efficient of Variation (4.76095/60)*100 | 7.93% |

4)Based on Standard Deviation , Stock-A is less risky as it has lower standard deviation.

5)Based on Co-efficient of Variation , I will select Stock-B , as it has lower coefficient of variation.