The individual security of Ajinomoto Bhd, Bonia Bhd and KPJ Healthcare Bhd which is used in the

analysis based on task 2 is common stock. Each security from these companies reflect positive
expected return which may send a signal to investors that each company is making profitable
investments resulting in enhancing the confidence of the shareholders. This boost up the share price
of the companies. However, it is not a realized return as it ignores the risk of these security and it is
largely based on historical data which may not be able to forecast accurate estimation. Hence,
standard deviation is crucial to address the sensitivity of the risk in securities. Ajinomoto Bhd is
found to have the highest expected return for the last ten years. This may be due to carrying out
large export volume across the country and outside of the country like Middle East and other Asia
countries resulting in higher profitability. Meanwhile, KPJ holds the second spot as this is due to
future expansions are being carried out for growth prospects and the recent weakened currency
causing a hike in medical fees signalling investors to lose confidence in the company as it reflects
highest risk. Bonia Bhd takes the last place with the smallest expected return but higher risk due to
poor demand in local fashion and subject to high currency risk in recent years causing depreciating
ringgit As a risk adverse investor expecting lower return and risk, Ajinomoto would be the best
investment as it guarantees full security. A risk taker would resort to investing KPJ Healthcare with
lower return and greatest risk.

Ajinomoto Bhd Bonia Bhd KPJ Healthcare Bhd

E(R) 0.2713 0.1666 0.2321

SD 0.28794135 0.391381601 0.472479944

Table 1

Based on the portfolio management analysis, portfolio A & C generates higher return with lower risk
However, it is negatively correlated where it is an inverse relationship between the securities. .
Aggressive investor that takes on higher level of risk would consider investing in this portfolio for
diversification as it reduces the volatility of the risk. When compared against the market, stock A has
negative beta with lower volatility and stock B with high volatility has positive beta (>1) reflecting a
balanced diversification where investor can offset loss with higher return. Portfolio of A & C is very
much similar as Portfolio A & C offering great diversification. However, it cannot guarantee as
economic condition may have significant impact on the return of the portfolio. Hence, it is advisable
for investors to diversify more in different classes of asset to protect from risk like bonds. The
portfolio of B& C is very volatile due to its beta and this may mean that there is frequent movement
in the share price posing greater risk. However, its return is slightly lower than portfolio A & C. As a
risk averse, one may opt to diversifying in bonds as it cheaper compared to common stocks and
offers fixed return compared to common stocks. In conclusion, before investing in any classes of
assets, one must be able to analyse their risk appetite and diversify as much as possible to prevent
greater risk which may result in loss for investors. As for the organization, it is important to maximise
the shareholders’ wealth for long term sustainability.

Stock A= Ajinomoto Stock A & B Stock A & C Stock B & C

Stock B= Bonia Bhd
Stock C= KPJ Healthcare Bhd
E(R) 0.21895 0.2517 0.19935

SD 0.045443427 0.034401972 0.138950877

CORREL -0.240987164 -0.619419156 0.485038649

Table 2

Stock A& KLCI Stock B & KLCI Stock C & KLCI

Beta -0.455640527 5.88352275 1.027946119

Table 3