You have to analyse our calculations that i will upload - Case Study Example

In choosing the securities that are to be included in the portfolio, the risk involved should be considered. Risk is usually measured by the use of beta. Beta is used as an indicator of how sensitive a stock is, towards market forces. A security that has a bet greater than 1 is said to be risky while a security that has a beta less than one is less risky. Risky securities are often associated with high returns. In the choice of the securities, the companies should not be correlated. That will ensure that the risk involved in the portfolio is minimal.

Our group has considered six companies. The companies include Adidas, Wal-Mart, Samsung, syngenta, Google and Lufthansa. The companies are from different industries and that will help in reducing the risk that is associated with the portfolio. A good portfolio should have securities that are not correlated (Levinson, 2006, 155). That will help in ensuring that a failure in one industry will not lead to a failure in the other. The first step in the evaluation in considering the securities is finding the average rate of return.

The average rate of return can be calculated by using the geometric or arithmetic mean. The rate of return was as follows, From the analysis of the rate of return, Google has the best rate of return while Wal-Mart is associated with the lowest rate of return. That means that if two investors invest the same amount of money in the two different companies, the investor at Google will earn more in terms of return. However, in making an investment decision, the risk factor has to be considered. Below is a table showing the risk associated with the securities.

From the analysis on risk involved in all the securities, Wal-Mart turns out to be the less risky security. Such analysis of risks and return will enable an investor to come up with the appropriate stock portfolio that will be well balanced. After analyzing the return that will accrue from individual securities, an analysis should be done