Financial Health and Core Performance - Assignment Example

The stock selection factored in dividend selection.  In this analysis, the number of times a company pays a dividend was considered.  Also, price to earning ratio was considered. Consequently, the two approaches resulted in the selection criterion whereby the firms with a high price-to-earnings ratio and paid dividends four times a year were preferred. Finally, a technical analysis was conducted. Under this analysis, the main consideration was the price activity on the stock chart. As such, the firms with a relatively stable trend were preferred. The combination of the three forms of analysis was used to arrive at the selected stocks and the number of stocks that were invested in each.

The beta value of the portfolio is -25.15180862 against a benchmark of -32.701. The figure is computed by summing the change in the value of the portfolio and dividing the figure by the summation of changes in the value of the benchmark.

Beta = 39.218 % / -1.559% = -25.1518062%

Therefore, the portfolio Beta beat the market value Beta since -25.1518062% is greater than -32.701%. However, in the two cases, Beta is negative implying that the general trend is opposite to that of the market.

The game serves as an eye-opener on the importance of computing individual beta values. The reason is that having an individually computed Beta value eliminates the limitation that may be found with the S & P 500 benchmark due to its generalization.  As a result, one can have a precise Beta value for a portfolio that specifically focuses on the stocks themselves. The approach improves the accuracy of one’s ability to predict the returns.