Investment Management

(a) It can be noted that stock prices and ASX 200 have fallen after January’20 and there is a significant fall in prices in March’2020. Although, stock prices have increased after Mar’20 but stock prices and ASX 200 is still significantly lower as compared to Jan’20 and Feb’20. Hence,it would not have been wise decision to trade on ASX since the start of 2020.

(b) Description of the Companies

Code

Name of the Company

ASX Industry group

Description & Products/Services

CBA

Commonwealth Bank of Australia

Banking

Commonwealth Bank of Australia is an Australian multinational bank. The main products of bank are Bank Accounts& Credit cards.

CSL

CSL Limited

Biotechnology

CSL Limited is global biotechnology company with headquarters in Melbourne, Australia. Two of its products are Biotherapies and Influenza vaccines

BHP

BHP Group Limited

Mining

It is a public listed company with headquarters in Melbourne, Australia. It deals in Petroleum &Technology

WES

Wesfarmers limited

 

It is an Australian conglomerate headquartered in Perth, Australia. Two of the products are Chemicals & Fertilizers

WOW

Woolworths Group

Retail

It is a major Australian company in Retail sectors. The main products are Fresh food, Financial services & Insurance

TLS

Telstra Corporation Ltd.

Telecommunications

It is an Australian Telecommunication company. The main products are Mobile Phones, Home Phones

WPL

Woodside Petroleum Ltd.

Petroleum exploration

It is a petroleum exploration and production company headquartered in Perth, Australia. It deals in Oil and gas production

GMG

Goodman Group

Commercial & Industrial property

It is a company in real estate sector with headquarters in Sydney, Australia. It deals in Property management & property development

(c) Graphical presentation of prices of shares- Please refer to excel sheet

Whether it would be best to buy or short sell each of the companies.

CBA- Prices have fallen since Jan’20 and then increased marginally in July’20. Hence it would be best to buy.

CSL-Prices have started falling after Jun’20. Hence it would be best to short sell.

BHP-Prices have fallen after Jan’20 and started to increase after May’20. Hence it would be best to buy.

WES- Prices have fallen after Jan’20 and started to increase after May’20. Hence it would be best to buy.

WOW- Prices have fallen after Jan’20 and started to increase after May’20. Hence it would be best to buy.

TLS- Prices have fallen after Jan’20 and started to increase after Jun’20. Hence it would be best to buy.

WPL- Price have fallen after Jan’20 and have increased in Apr’20 and have started declining from Jun’20. Hence it would be best to short sell.

GMG- Price have increased since Jun’20. Hence it would be best to buy.

(d) Please refer to excel sheet attached for calculation

Company

CBA

CSL

BHP

WES

WOW

TLS

WPL

GMG

Standard Deviation of monthly returns

5%

5%

7%

5%

5%

5%

7%

6%

(e) Please refer to excel sheet for calculation

Company

CBA

CSL

BHP

WES

WOW

TLS

WPL

GMG

Correlation between company’s monthly returns and ASX 200’s returns

0.75

0.38

0.62

0.70

0.51

0.44

0.76

0.64

(f) The four best companies to create portfolio would be CSL, WES, WOW & TLS as they have lower standard deviations and comparatively higher returns

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