Devanshu Jain-2012207

Shashi Kant Soni-2012237

Section-D

Assignment 1

TATA CONSULTANCY SERVICES LTD.

The monthly adjusted closing prices for TCS, the monthly return and risk tabulated below
Month
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12

Adjusted Closing Prices(Rs)

766
742
751.15
841.1
843.85
922.55
1051.8
1076.7
1165.05
1157.15
1112.95
1182.5
1163.6
1158.8
1180.35
1134.45
1040.6
1037.5
1114.2
1113.1
1161.25
1130.5
1221.05
1167.85

Rate of Return(%)
-3.133159269
1.233153639
11.97497171
0.3269528
9.326302068
14.01008075
2.367370222
8.205628309
-0.678082486
-3.819729508
6.249157644
-1.598308668
-0.412512891
1.85968243
-3.888677087
-8.272731279
-0.297905055
7.392771084
-0.098725543
4.325756895
-2.648008611
8.009730208
-4.356905942

Deviation from average

26.38362091
0.593186457
99.4334464
2.810272795
53.62577891
144.1618325
0.132518274
38.46838489
7.190024547
33.90813415
18.02697063
12.97187044
5.83634339
0.02063739
34.71586096
105.5976333
5.295727086
29.04597143
4.41867798
5.393621967
21.63504044
36.07672781
40.4527237

Average Monthly Return (%) = 2.003339627

Annual Return (%) = 26.87401731
Risk (%) = 5.7453341
Similarly,
Average Weekly Return (%) = 0.063425413
Annual Return (%) = 3.417583327
Average Daily Return (%) = 0.013419218
Annual Return (%) = 3.383731568
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Devanshu Jain-2012207
Shashi Kant Soni-2012237
Section-D

The annualised risk and return of Infosys are:Average Monthly Return = 0.488852373
Annual Return = 6.026551684
Risk (%) = 7.757146614
30
20
10
Infosys -

TCS -

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
-10
-20
-30

Returns TCS vs Infosys

The annualised return from TCS are far more than Infosys and also the risk from TCS is less than
Infosys. So investing in TCS is a better option.
Different portfolios with investments in TCS and Hero Motocorp and their respective returns and
risks are shown below
Correlation between TCS and Hero Motocorp = 0.17
Portfolio

Return(%)
TCS

1
2
3
4
5
6
7
8
9
10
Min
Variance

26.87
26.87
26.87
26.87
26.87
26.87
26.87
26.87
26.87
26.87
26.87

Return (%)
Hero
Motocorp
7.9
7.9
7.9
7.9
7.9
7.9
7.9
7.9
7.9
7.9
7.9

Percentage of
TCS

10%
20%
30%
40%
45%
50%
60%
70%
80%
90%
68%

Percentage of Hero
Motocorp

Portfolio
Return

90%
80%
70%
60%
55%
50%
40%
30%
20%
10%
32%

9.797
11.694
13.591
15.488
16.4365
17.385
19.282
21.179
23.076
24.973
20.90708

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Devanshu Jain-2012207
Shashi Kant Soni-2012237
Section-D

Portfolio Risk(%)
TCS
1
2
3
4
5
6
7
8
9
10
Min
Variance

5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75

Risk(%)
Hero
Motocorp
7.91
7.91
7.91
7.91
7.91
7.91
7.91
7.91
7.91
7.91
7.91

Percentage
of TCS

10%
20%
30%
40%
45%
50%
60%
70%
80%
90%
68%

Percentage of Hero
Motocorp

90%
80%
70%
60%
55%
50%
40%
30%
20%
10%
32%

Covariance

7.73
7.73
7.73
7.73
7.73
7.73
7.73
7.73
7.73
7.73
7.73

Portfolio
Risk

0.834195571
1.112260761
1.274254782
1.362235662
1.383356855
1.390325951
1.362235662
1.274254782
1.112260761
0.834195571
1.297107798

Out of these 10 portfolios the best portfolio is the one in which 90% investment is in TCS and 10% in
Hero Motocorp since the returns are maximum and risk is minimum.
Minimum Variance Portfolio
w*=0.68
That means the minimum variance portfolio will be one in which 68% investment is in TCS and 32%
investment is in Hero Motocorp.
Learning from the exercise
We learned how to use Prowess Database to find out the daily, weekly and monthly share
prices of a company.
We learned how to calculate the annual returns and risks from investing in the shares of a
company given the daily, monthly and weekly share prices.
We compared two companies from the same industry and found out the returns from one
were more than the other and risk was also less which helps us in determining the better
investment option.
We learned how to create different portfolios by investing in different industries and
calculated the risks and returns of various portfolios which helps us in determining the best
portfolio.
We also learned how to calculate the correlation between two companies and what does it
indicate. In our case the correlation between TCS and Hero Motocorp is 0.17 which shows
that there is a positive linear relationship between the two companies but they are not very
dependent on each other as the correlation shows the degree of dependence between two
companies.
We learned how to calculate the minimum variance portfolio.
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