5.

RESULT AND FINDINGS

a) Variance, standard deviation and return

Total Variance

ASTR 0.000456494

Kenanga 0.000110619

FGVH 0.000442506

VSOL 0.029729214

FRAS 0.000265358

PGAS 0.000091916

KPJH 0.000272174

GDEX 0.000372834

EKOV 0.000421585

ECOW 0.000992803

Table 1: Total variance of 10 stocks with different sectors.

Table 1 above shows the total variance of 10 companies selected stocks with the different
sectors. Variance is referring to the level of risk associated with an investment that represents the
actual return on investment. Risk reflects the probability that a real return or profit or loss on an
investment will be greater or lesser than expected for a given period of time. Higher risk and
higher return are related with higher volatility in a stock's performance, while lower variance is
associated with lower risk. According to table 1, the majority of the stocks mentioned above
have a low variance which is all the variance is lower than 1, which is ASTR (0.000456494);
Kenanga (0.000110619); FGVH (0.000442506); FRAS (0.000265358); PGAS (0.000091916);
KPJH (0.000272174); GDEX (0.000372834); EKOV (0.000421585) and ECOW (0.000992803).
Low volatility implies reduced risk and lower return. But as shown in the table above, VSOL has
the highest variance among the others with value 0.029729214. All the 10 companies prefer
investors with a low tolerance for risk and prefer low-variance stock. As a result, for the risk-
averse investor, these ten stocks are a good place to invest.

Total Standard Deviation

ASTR 0.021365728

Kenanga 0.010517555

FGVH 0.021035831

VSOL 0.172421617

FRAS 0.016289805

PGAS 0.009587267

KPJH 0.016497691

GDEX 0.019308902

EKOV 0.020532545

ECOW 0.031508772

Table 2: Total standard deviation of 10 stocks with different sectors.

As shown in table 2 is the standard deviation of the 10 companies selected stocks with the
different sectors. Standard deviation can be useful as a tool to assist investors understand how
risky an investment is and show investors the historical volatility of investments. It analyses the
probability of risk and helps to determine the stability of a portfolio's returns. A more volatile or
risky investment is one with a higher standard deviation while less volatile investments have a
lower standard deviation. On the basis of Table 2 above, the VSOL has the highest value of
standard deviation with value 0.172421617. It follows by the others companies that show a
standard deviation is lower than 1, which is ASTR (0.021365728); Kenanga (0.010517555);
FGVH (0.021035831); FRAS (0.016289805); PGAS (0.009587267); KPJH (0.016497691);
GDEX (0.019308902); EKOV (0.020532545) and ECOW (0.031508772). A low standard
deviation means that you would predict a return to stocks to be the same each year. Therefore,
investors who invest in the stock of these 10 companies should expect a blow. Therefore, for
investors who invest in these 10 companies' stock, they can expect to get a stable rate of return
each year.

Total Return

ASTR 0.000874795

Kenanga 0.000189386

FGVH 0.000904290

VSOL 0.010549350

FRAS -0.000857223

PGAS -0.000187310

KPJH 0.000298242

GDEX -0.001267683

EKOV -0.001090068

ECOW 0.003598146

Table 3: Total return of 10 stocks with different sectors.

Return is the computation of the percent rate of return over a given period of time in the
stock market. Based on the table 3 above, it contains the return of the 10 companies selected
stocks with the different sectors. The result shows 4 companies have the negative value of stock
return which is FRAS (-0.000857223); PGAS (-0.000187310); GDEX (-0.001267683) and
EKOV (-0.001090068). These companies show a negative value which means that all of them
during a given period of time, a company suffers a financial loss, or investors suffer a decrease in
the value of their investments. In other words, the company suffers a financial loss as a result of
its business. Others 6 companies shows the positive value of stock return which is ASTR
(0.000874795); Kenanga (0.000189386); FGVH (0.000904290); VSOL (0.010549350); KPJH
(0.000298242) and ECOW (0.003598146). These companies show a positive value which
means that all of them during a given period of time have a profit which indicates the total return
is greater than total cost. Therefore, for investors who invest in these 6 companies' stock, they
can expect to get a stable rate of return each year.

b. Covariance, Correlation and Beta

Total Covariance

ASTR 0.0000350254

Kenanga 0.0000257796

FGVH 0.0000325634

VSOL 0.0000415792

FRAS 0.0000280504

PGAS 0.0000182777

KPJH 0.0000133157

GDEX 0.0000329449

EKOV 0.0000407689

ECOW 0.0000232534
 Table 4: Total covariance of 10 stocks with different sectors.

Covariance quantifies the directionality of the relationship between two assets' returns
and how two variables are related. A positive covariance indicates that the two variables under
consideration are positively connected and that they are moving in the same direction as one
another. While a negative correlation coefficient indicates that the variables are inversely
connected, or that they move in the opposite way. For this covariance, we compare the returns of
ten different stocks to the return of the KLCI. Table 4 of covariance for ten stock returns reveals
that both stock and index returns have a similar range of value with 0 covariances; ASTR
(0.0000350254); Kenanga (0.0000257796); FGVH (0.0000325634); VSOL (0.0000415792);
FRAS (0.0000280504); PGAS (0.0000182777); KPJH (0.0000133157); GDEX (0.0000329449);
EKOV (0.0000407689) and ECOW (0.0000232534). This demonstrates that there is no linear
relationship between the returns of the ten stocks and the KLCI return. We already know that the
covariance is 0 when two random variables are independent. However, the 10 companies have a
positive covariance with the market, and this shows the direction of movement between the 10
different sectors with the market were the same as each other.

Total Correlation

ASTR 0.237123644

Kenanga 0.354544712

FGVH 0.223912965

VSOL 0.034881345

FRAS 0.249075918

PGAS 0.275762388

KPJH 0.116748102

GDEX 0.246797102
 EKOV 0.287206943

ECOW 0.106748828

Table 5: Total correlation of 10 stocks with different sectors.

A correlation is a statistical measure of how closely two securities move in respect to one
another. In this case, the correlation coefficients are between -1.0 and 1.0 in value. In order to
have a perfect positive correlation, the correlation coefficient must be exactly 1. This indicates
that while one security moves, either up or down, the other security moves in lockstep with it, in
the same direction. While a negative correlation indicates that the movements of two assets are in
complete opposition to one another. The correlation between 10 selected stocks and KLCI price
movement can be seen in Table 5. As mentioned in the previous variance description, the 0
variances will also make the correlation amounted to ASTR (0.237123644); Kenanga
(0.354544712); FGVH (0.223912965); VSOL (0.034881345); FRAS (0.249075918); PGAS
(0.275762388); KPJH (0.116748102); GDEX (0.246797102); EKOV (0.287206943) and ECOW
(0. 106748828). On the basis of this statement, the price of the stocks except VSOL shows a
similar range or correlation because the value is in the range 0.1 to 0.3. However, the 10
companies have a positive correlation with each other, and this shows the direction of movement
between the 10 different sectors was the same.

Total Beta

ASTR 0.732826950

Kenanga 0.539379781

FGVH 0.681314757

VSOL 0.869949033

FRAS 0.586889721
 PGAS 0.382418364

KPJH 0.278600489

GDEX 0.689297213

EKOV 0.852995202

ECOW 0.486523103

Table 6: Total beta of 10 stocks with different sectors

Beta is used to evaluate the projected movement in a stock in relation to moves in the
overall market. The higher the beta which is more than 1.0 means the more volatile the stock is,
and the lower the beta which is less than 1.0 it shows the less volatile the stock is. The use of
beta is that investors can estimate and measure the risk of stocks being added to the portfolio.
According to table 6, the beta of 10 selected stocks all the companies show the less volatile of
the stock. Generally, the value of 7 companies is usually regarded as a good value of beta. This is
due to the value beta that companies have is in range of 0.5 to 0.8 with value is near to 1.0,
which is Kenanga (0.539379781); FRAS (0.586889721); FGVH (0.681314757); GDEX
(0.689297213); ASTR (0.732826950); EKOV (0.852995202) and VSOL (0.869949033). It
means when adding stock to a portfolio will be a less risky portfolio and expected return. While,
the others 3 companies have a lower value because its beta is 0.2 to 0.4; PGAS (0.382418364);
KPJH (0.278600489) and ECOW (0.486523103), implying that adding this stock to a portfolio
will make it less risky than a portfolio without it.
c. Portfolio standard deviation

Total Standard Deviation

ASTR 0.0214

Kenanga 0.0105

FGVH 0.0210

VSOL 0.1724

FRAS 0.01629

PGAS 0.00958

KPJH 0.01650

GDEX 0.01931

EKOV 0.02053

ECOW 0.03151

The portfolio standard deviation is the financial measure of investment risk and
consistency in investment earnings. From the calculation, we can see that VSOLAR has the
higher portfolio standard deviation which is 0.1727. A high standard deviation in a portfolio
indicates high risk because it shows that the earnings are volatile. However, PGAS has a lower
portfolio standard deviation which is 0.0096. This means that PGAS tends to be more
predictable. Portfolio standard deviation for Kenanga, KPJH, GDEX, FRAS, ASTRO, FGVH,
EKOV and ECOW are 0.0105, 0.0165, 0.0193, 0.0163, 0.0214, 0.0210, 0.0205 and 0.0315
respectively. A mutual fund with a long track record of consistent returns will display a low
standard deviation. A growth-oriented or emerging market fund is likely to have greater volatility
and will have a higher standard deviation. Therefore, it is inherently riskier.
 Kurtosis Skewness

ASTR 1.7054 0.4431

Kenanga 16.9505 -2.2167

FGVH 38.8006 4.1929

VSOL 2.7594 1.0324

FRAS 2.3729 0.2531

PGAS 1.5888 0.2699

KPJH 1.5415 0.2273

GDEX 1.3102 0.3908

EKOV 1.8963 0.1198

ECOW 3.0197 0.5497

Kurtosis is a measure of whether the data are heavy-tailed or light-tailed relative to a

normal distribution. That is, data sets with high kurtosis tend to have heavy tails or outliners.
Data sets with low kurtosis tend to have light tails or lack of outliners. FGVH, Kenanga, and
ECOW have kurtosis greater than 3 which are 38.8006, 16.9505 and 3.0197 respectively. This
means that the dataset has heavier tails than a normal distribution. However, GDEX, KPJH,
PGAS, EKOV, ASTRO, FRAS and VSOL have the kurtosis lower than 3 which are 1.3102,
1.5415, 1.5888, 1.8963, 1.7054, 2.3729 and 2.7594 respectively. This indicates that the dataset
has lighter tails than a normal distribution.

Skewness is a measure of symmetry or more precisely, the lack of symmetry. A

distribution or data set is symmetrical if it looks the same to the left and right of the center point.
ASTRO, FGVH, VSOL, FRAS, PGAS, KPJH, GDEX, EKOV and ECOW have the positive
skewness which are 0.4431, 4.1929, 1.0324, 0.2531, 0.2699, 0.2273, 0.3908, 0.1198 and 0.5497
respectively. This means that positive values for the skewness indicate data that are skewed right.
Similarly, skewed right means that the right tail is long relative to the left tail. However,
Kenanga has a negative skewness which is -2.2167. Negative values for the skewness indicate
data are skewed left. By skewed left, it means that the left tail is long relative to the right tail.

Descriptive Analysis (Range, Minimum and Maximum Value):

Range Minimum Maximum

ASTR 0.1432 -0.0655 0.0776

Kenanga 0.1125 -0.0842 0.0282

FGVH 02650 -0.0573 0.2076

VSOL 0.8333 -0.3333 0.5

FRAS 0.1336 -0.0625 0.0711

PGAS 0.0631 -0.0299 0.0332

KPJH 0.1132 -0.0495 0.0636

GDEX 0.1282 -0.0588 0.0694

EKOV 0.1571 -0.0865 0.0705

ECOW 0.2694 -0.1176 0.1518

From the calculation, the VSOL has the highest range and maximum values which are
0.8333 and 0.5 while the Kenanga has a lower maximum value is 0.0282. However, the PGAS
has a lower range which is 0.06312 than the other. Meanwhile, the minimum value for all
companies has a negative value with the PGAS having the highest minimum value which is -
0.0299 and the VSOL having the lower minimum value which is -0.3333.
6. CONCLUSION

From these findings, we can conclude that all the 10 companies are a low tolerance for
risk and have low-variance stock. For the risk-averse investor, these ten stocks are a good place
to invest. From the each and portfolio’s standard deviation, we can expect to get a stable rate of
return each year. VSOLAR has the highest portfolio standard deviation of 0.1727 while PGAS
has the lowest portfolio standard deviation which is 0.0096. The volatility of VSOLAR might
affect rate of return although it offers high return for high risk. There is no linear correlation
between the returns of the ten stocks and the KLCI return, though it indicates the direction of
movement for the 10 different sectors with the market being identical. All 10 companies have a
positive correlation with each other and shows the movement between 10 different sectors are
identical. All companies also have decent value of beta and pose a low risk portfolio with VSOL
having the highest value of beta of 0.86995.

Beta

Generally, the value of 7 companies is usually regarded as a good value of beta. This is due to
the value beta that companies have is in range of 0.5 to 0.8 with value is near to 1.0, which is
Kenanga (0.539379781); FRAS (0.586889721); FGVH (0.681314757); GDEX (0.689297213);
ASTR (0.732826950); EKOV (0.852995202) and VSOL (0.869949033). It means when adding
stock to a portfolio will be a less risky portfolio and expected return.