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This is an individual assignment which requires you to assess the investment returns and risk of
two selected companies for the specified investment time period. The nature of the
relationship between the two investments needs to be evaluated to determine whether there
is any diversification benefit from investing in both investments instead of one.
Instructions:
Select two publicly listed company of your choice as investment opportunities. For comparison,
select a relevant market index [for example, the S&P500 Index, Straits Times Index (STI),
Financial Times Stock Exchange 100 Index (FTSE)].
Required:
1. Data compilation
Obtain the following data for each of the selected companies and the market index:
(a) Yearly share price from 1 Jan 2018 – 31 Dec 2022 (inclusive of both dates).
(b) Annual dividends paid for 2018 – 2022.
2. Investment Returns
(a) For each of the selected companies and market index, compute:
(i) the arithmetic rate of return (%) for each year separately;
(ii) the average arithmetic return for entire investment period from 1 Jan 2018 until 31
Dec 2022.
[Note: Total returns comprise of capital gains and dividends.]
(5 marks)
1
Investment
(b) For each of the selected companies and market index, compute the geometric rate of
return (%) for entire investment period from 1 Jan 2018 until 31 Dec 2022.
(5 marks)
(c) Explain the performance measures computed in 2 (a)–(b) and comment on the
investment returns of the selected companies during the period being evaluated.
(15 marks)
[Total for Part 2 = 25 marks]
3. Investment risks
(a) For each of the two selected companies and market index, compute the standard
deviation of the respective investment returns of the two companies and market index.
(5 marks)
(b) Obtain the beta value from any stock data providers (such as Yahoo Finance, Nasdaq or
other sources).
(5 marks)
(c) Explain the investment risk measures obtained in Part 3 (a) and (b). Analyse the
investment risk of the selected companies for the period being reviewed.
(10 marks)
[Total for Part 3 = 20 marks]
4. Correlation
(a) Using Microsoft Excel or other spreadsheet, compute the correlation between:
(i) Company 1 and Company 2.
(ii) Company 1 and the market index.
(5 marks)
(b) Explain what correlation is and comment on the findings in Part 4(a).
(10 marks)
[Total for Part 4 = 15 marks]
5. Portfolio of funds
Suppose that three different investment funds are created:
Investment Fund A: portfolio comprising of 80% investment in the selected Company 1 and
20% investment in the selected Company 2.
Investment Fund B: portfolio comprising of 60% investment in the selected Company 1 and
40% investment in the selected company 2.
Investment Fund C: portfolio comprising of 30% investment in the selected Company 1 and
70% investment in the selected Company 2.
Investment
Required:
(a) Compute:
(i) Portfolio returns for Investment Fund A, Investment Fund B and Investment Fund C
separately, for the time period under review. Provide your workings to the
computations.
(5 marks)
(ii) Portfolio risk for Investment Fund A, Investment Fund B and Investment Fund C
separately, for the time period under review. Provide your workings to the
computations.
(5 marks)
(b) Comment on which investment fund performed better and the diversification benefit
obtained from the portfolio.
(10 marks)
[Total for Part 5 = 20 marks]
6. Introduction, Conclusion, Overall formatting, Use of tables and graphs to illustrate data and
Proper referencing.
[Total for Part 6 = 15 marks]
Additional information:
All pages must be clearly numbered and the layout of the report must be formatted on A4-
sized portrait orientation with one-inch margin and font size 12 using Times New Roman.
The word count must be displayed on the Cover page. The word count stipulated excludes
any references, charts, tables or figures.
This assignment requires you to apply your knowledge and understanding about investment
returns and risks to the companies you selected and compare with market index. The data
and figures computed can aid in justifying your analysis and findings on the investment
performance of the company.
Ensure that all your workings and data is clearly presented with clear linkage to how the
data is derived or obtained.
This assignment should be based on public information only (from the company’s website
or any published information including the annual report).
Note:
Please note that MDIS policy on cheating collusion and plagiarism will be applied to this piece
of work. MDIS requires that students do not submit work for assessment which contains
someone else’s work ideas, observations or conclusions without due acknowledgement.
Marking Scheme
Area Marks
Introduction: 5
Clear concise introduction to the overall paper, companies selected,
and the market index selected.
Content: 85
Part 1: Accurate extraction of required data 5
presented clearly in a table.
Conclusion: 5
Students should demonstrate ability to conclude about the overall
investment performance of the selected companies and portfolio of
funds.
Total 100