Risk & Return Analysis

Topics: Stock, Investment, Standard deviation Pages: 4 (1010 words) Published: February 7, 2012

Ethan Cromartie

Risk & Return Analysis

BUS 505 Corporate Finance

Certificate of Authorship:

I certify that I am the author of this paper and that nay assistance received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any source from which data, words, or ideas either quoted directly or paraphrased has been used. I also certify that this paper was prepared by me specifically for this course

Ethan Cromartie


Investments held individually.

Nike Inc., has a standard deviation of 8.2, almost double that of the markets. While Nike has been a consistently strong company its average rate of return for the past 10 years was .77%. This is significantly stronger that the markets return over the same 10 years. A standard deviation of 8.2 is a pretty strong deviation, and shows people that are willing to invest in the company that they are investing in a strong company that has shown the ability to grow, and create dividends for its stock holders consistently. The beta of .73 shows that Nike’s returns are somewhat similar to that of the markets, but still not enough to be affected by the overall economic situation the market may face. The coefficient variation of 9.37 is not bad, but it does not paint the whole picture when looking at Nike as an individual stock.

Merck & Co., has a standard deviation of 7.87, which is lower than Nike’s so at first glance a person may think they have the more favorable stock. Merck has shown the ability to be very diverse company with strong management and strong people. This deviation is still slightly higher than the market deviation. Merck has a beta of .67, this shows that current market will have less of an impact on Merck than others, in a weaker market Merck has the ability to stay strong. The average rate of return for Merck was -0.37%, which I found very interesting seeing that Merck has...
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