Analysis Of Carolina Data

Syed Danyal Shah

BBA
Subject: Statistics
Submitted To: Dr. Zafar Zaheer
Contents
Introduction.................................................................................................................................................3
Statistics......................................................................................................................................................3
Correlation Table.........................................................................................................................................4
Inflation.......................................................................................................................................................4
Treasury Bills..............................................................................................................................................5
Correlation between Inflation And Treasury Bills........................................................................................5
Treasury Bonds...........................................................................................................................................6
Corporate Bonds..........................................................................................................................................6
Common Stocks...........................................................................................................................................7
Conclusion...................................................................................................................................................8

Table 1: Statistics of Carolina Data.............................................................................................................3

Table 2: Correlation.....................................................................................................................................3

Figure 1: Inflation Chart..............................................................................................................................4

Figure 2: Treasury Bills Chart.....................................................................................................................5
Figure 3: Correlation between Inflation And Treasury Bills.........................................................................5
Figure 4: Treasury Bonds Chart..................................................................................................................6
Figure 5: Corporate Bonds Chart.................................................................................................................7
Figure 6: Common Stock Chart...................................................................................................................7
Introduction

There is the data of Carolina. There is 4 option to invest i.e. Treasury bills, treasury bonds,
corporate bonds, & common bonds. We have been given the historic data from 1926 to 1996 as well as
the inflation rate in this era. This data may help an individual to perform decision making either where to
invest or where not to invest. It can also help us to find out the risk factor in the given 4 options. This data
also tells us about the annual return of the profit/ loss.

Statistics

Table 1: Statistics of Carolina Data

Treasury
  Inflation Bills Treasury Bonds Corporate Bonds Common Stock
Minimum -10.3 -0.02 -9.18 -18.5 -43.34
Maximu
m 18.2 16.0 40.4 42.6 54.0
Average 3.20 4.03 5.57 5.82 13.0
Standard
Deviation 4.51 3.51 9.21 9.09 20.3

This statistics shows us the minimum, maximum, average and standard deviation of these 4
variables. As we can see that common stock has the negative value i.e. -43.34 which tells us it is the
most risky variable and have more chances to make losses.The maximum statistics show that the
common stock has the highest value i.e. 54.0 which means investing in this variable can be risky but
have more chances to earn more.

The average statistics also shows us that the common stock variable has more average value as
compare to other variable.

At the end, if we find out the standard deviation of all 4 variables than we came to know that
either there is higher chances of profit in investing in common stock but have higher fluctuations as
compare to other variables which shows the risk in it.
Correlation Table

Table 2: Correlation

Correlation Inflation
Treasury Bills 0.36
Treasury Bonds -0.14
Corporate Bonds -0.07
Common Stocks -0.02

This table shows us correlation of 4 variables with inflation. As we can see, the treasury bonds,
corporate bonds and common stock has inverse relation with inflation. It means if someone is going to
invest in these 3 options than he/she needs to notice the rise and fall of inflation in the country. But the
treasury bills has positive relation with inflation because As a general rule, economic inflation will cause
the interest rate on Treasury bills to rise, while deflation will cause the interest rates to fall. So those who
invest in treasury bills will be benefited from rise in inflation.

Inflation

Inflation
20

15

10

0
26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19
-5

-10

-15

Inflation
Figure 1: Inflation Chart
Treasury Bills

Treasury Bills
18
16
14
12
10
8
6
4
2
0
-2 26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

Treasury Bills

Figure 2: Treasury Bills Chart

This graph shows that in 1934, the return rate was the highest i.e.16 while in 1940, the return
rate was almost 0. There is stability in the treasury bills and the safe place to invest as there is no risk of
any loss.

Correlation between Inflation And Treasury Bills

Chart Title
20
15
10
5
0
26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19
-5
-10
-15

Inflation Treasury Bills

Figure 3: Correlation between Inflation And Treasury Bills

 There is a positive relation between inflation and Treasury bill. When the inflation rises, the
interest rate also rise which results in the benefit to the Treasury bill return but in 1944-1948, the
inflation rate increases with the value of 16 but the treasury bill annual return doesn’t.

Treasury Bonds

Treasury Bonds
50

40

30

20

10

0
26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19
-10

-20

Treasury Bonds

Figure 4: Treasury Bonds Chart

In the graph of treasury bonds, we can see the fluctuations in it. According to this graph, the
values can be anytime positive or negative but the fear of losing all investment is low in treasury bonds
because we can see that the graph doesn’t show a huge amount of loss. Hence, investing in treasury
bonds is less risky and there is a little chances of making high profit like the era of 1980-1993.

Corporate Bonds
 Corporate Bonds
50
40
30
20
10
0
26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19
-10
-20
-30

Corporate Bonds

Figure 5: Corporate Bonds Chart

This graph shows that there is no much profitability from 1926-1968 but after that it start
earning and the value fluctuates. in 1931, the corporate bonds make a highest loss of 18.2 and at that
time the inflation was -18.5 while in 1982, the value of return of corporate bond is highest i.e. 42.26 and
at that time the inflation rate was 3.87.

Common Stocks
Common Stocks
60

40

20

0
26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19
-20

-40

-60

Common Stocks

Figure 6: Common Stock Chart

 This graph clearly shows the very much fluctuations in the value which indicates the high risk. It
can be probably generate a high profit or can make a loss of the investor. It continuously fluctuates.

Conclusion

Investment in common stock will be risky but can be profitable. As we can see that the data
shows us the maximum profit of 53.99. Treasury bills are the safest platform to investment which have
almost no risk. But the Treasury bond has less risk but have high range of profit. So according to my
analysis, Treasury bond will be a better place to invest if someone wants higher profit with low risk
otherwise common stock is best for those investors who are interested in earning more and more profit
with higher risk.