Investment research - Essay Example

INVESTMENT RESEARCH and Section # of Investment Research Australia, with its high growth, stable political and economic environment, and a competitive business sector, is ranked 12th largest economy in the world. Similarly, Australian equity markets have become the most common destinations for investment in recent years for its sustained returns and less risk.The five companies- BHP Billiton, National Australian Bank, Telstra, Westpac Banking and Woolworths- have been analyzed in this report with respect to their returns, risks and correlations.

Appended Table 1 shows that calculated monthly returns of the five companies from July 2007 to August 2013. Similarly, appended graph 1 shows the variations of these companies’ returns over the same period of time. We can see in the graph that the National Australian Bank and Westpac Banking show the greatest variation amongst the five options. This signifies the high risk involvement. Nonetheless, Woolworths shows the least variation and a moderate return and appears to be the best option for investment.

The picture will be further clarified with the help of average returns and risk measurements. Woolworths is the best option amongst the five investment options as seen in appended table 2. The company provides one of the best returns with least amount of risk involvement. Similarly, Telstra also seems to be a viable option for the investment as it provides a moderate return with least risk entanglements. However, greater returns involve higher risks. Westpac Banking provides the highest returns amongst the options; nonetheless, it is also the riskiest option amongst them.

On the other hand, National Australian Bank is one of the worst options to be availed as it provides the least return with a high risk factor. Thus, E must see the highest investment in the portfolio. However, in a portfolio, we need to balance our investment. We will need to make investments in all the five options so that we can earn a moderate return in all the situations. Since, Woolworths is the best possible company; therefore it must see the largest chuck of the investment. Similarly, another major chuck must be invested in Telstra.

The other companies must only see a small chuck of investment to balance the portfolio.ReferencesBesley, S. and Brigham, E. (2003). Principles of finance. South Melbourne, Victoria: Thomson Learning.Brealey, R. and Myers, S. (1991). Principles of corporate finance. New York: McGraw-Hill.Bulmer, M. (1979). Principles of statistics. New York: Dover Publications.Australian Stock Exchange (2013). Home - Australian Securities Exchange - ASX. [online] Retrieved from: http://www.asx.com.au/ [Accessed: 4 Oct 2013].

The Australian (2013). The Australian. [online] Retrieved from: http://www.theaustralian.com.au/business/markets [Accessed: 4 Oct 2013].AppendixTable 1: Expected Monthly Returns BHP BILLITONNATIONAL AUS.BANKTELSTRAWESTPAC BANKINGWOOLWORTHS17.26%7.66%-1.78%7.28%11.00%215.37%-0.30%-2.27%3.90%0.88%35.39%9.30%9.28%9.06%12.11%4-7.89%-10.80%-0.64%-9.21%0.18%5-7.08%-2.60%0.21%-0.99%1.80%6-3.96%-6.32%-5.97%-5.01%-13.50%70.10%-23.22%5.67%-14.22%-1.94%8-5.03%7.17%-5.15%2.86%-0.10%917.05%3.33%4.52%4.91%-2.01%106.04%1.10%3.68%-7.66%-1.10%11-2.40%-15.12%-11.69%-15.26%-14.01%12-11.91%-5.77%6.86%9.27%7.33%135.04%1.27%-4.87%12.86%7.26%14-20.28%4.26%-0.47%-1.86%3.87%15-8.70%-2.33%-1.87%-7.66%3.24%160.00%-22.59%-3.57%-21.10%-7.86%171.81%7.41%-5.43%0.18%-2.31%18-1.45%-10.35%-2.61%-9.78%1.80%19-6.83%-6.41%-6.17%6.47%-3.31%2014.85%16.05%-11.71%19.14%-5.18%212.80%2.17%8.74%-2.42%6.15%228.30%8.48%-8.04%-0.05%-3.86%23-5.15%-3.69%8.41%3.91%2.99%2412.30%15.03%5.07%12.30%2.45%25-2.05%16.99%-6.82%12.44%6.72%26-0.24%4.04%0.00%4.27%2.80%27-1.32%-4.84%-1.22%-1.24%-3.91%2812.61%-1.21%6.17%-5.51%-0.11%294.31%-4.03%-0.29%4.63%-0.78%30-9.09%-4.74%-3.21%-7.00%-8.89%314.54%-1.88%-11.45%12.75%7.96%327.25%7.97%2.04%5.28%2.40%33-10.06%0.90%6.00%-1.32%-4.29%34-3.39%-12.76%-7.23%-17.45%-1.04%35-2.83%-5.38%7.80%-8.53%-0.26%368.60%9.90%2.83%16.29%-3.27%37-5.93%-5.77%-14.68%-7.64%9.55%384.09%4.82%-5.38%2.60%2.55%397.20%3.56%1.52%0.52%-2.63%402.13%-10.00%4.10%-6.94%-5.64%414.75%1.72%0.00%3.54%1.39%42-1.39%3.76%-0.72%3.74%-1.15%433.92%3.99%0.36%1.00%1.65%440.67%1.60%1.08%4.90%0.15%45-1.14%4.97%2.49%1.52%-2.32%46-3.51%-4.40%5.21%-11.42%3.32%47-1.71%-2.26%-3.63%0.36%1.39%48-3.36%-3.89%3.42%-5.54%-2.41%49-5.74%-2.61%1.32%-0.43%-5.90%50-14.35%-9.31%-0.65%-5.89%-3.92%517.67%16.04%2.30%12.51%-3.39%52-1.14%-3.71%2.25%-3.69%5.07%53-5.31%-3.35%4.72%-5.35%0.92%547.23%1.28%-0.90%4.25%-1.59%55-3.68%-0.34%0.00%-0.72%2.43%56-1.21%3.86%-0.91%4.93%1.34%572.42%2.94%9.17%5.11%2.07%58-11.79%-10.87%1.96%-10.47%1.76%59-0.03%5.74%2.47%4.99%0.86%60-0.06%5.68%8.31%8.34%6.92%61-0.91%0.76%-3.96%6.88%4.46%625.44%0.95%0.00%0.36%-3.83%632.11%-2.04%5.41%0.80%0.55%642.13%-2.92%6.36%1.67%1.45%657.41%2.92%0.46%1.88%-0.34%662.21%12.00%6.41%8.68%7.09%67-2.85%8.57%-2.58%9.65%10.89%68-11.07%1.45%-0.44%-0.87%-2.99%69-1.80%10.08%11.53%10.73%7.25%705.97%-13.70%-7.36%-14.86%-9.74%71-9.24%-1.13%0.21%-3.55%-1.56%7213.67%6.08%7.49%10.37%4.07%Graph 1: Monthly Returns]Table 2: Expected Returns and Variances BHP BILLITONNATIONAL AUS.

BANKTELSTRAWESTPAC BANKINGWOOLWORTHSMonthly Avg Return0.23%0.07%0.31%0.60%0.46%Monthly Avg Variance0.00520.00640.00300.00670.0026A = BHP BILLITONB = NATIONAL AUS.BANKC = TELSTRAD = WESTPAC BANKINGE = WOOLWORTHSTable 3: CorrelationsA & B0.3799A & C0.0446A & D0.3868A & E0.0176B & C0.1278B & D0.8185B & E0.3890C & D0.1173C & E0.2564D & E0.4416