Security Analysis and Portfolio Management Vth Sem BBA

MODULE 1
INTRODUCTION

SYLLABUS CONTENT

Meaning of Securities, Types of Securities like Debt, Equity and Derivatives. Forms of
Investment – Financial and Non-Financial forms of Investment, Factors influencing selection
of Investments – Investment Process, Introduction to Risk & Return including Problems,
Correlation concepts with problems, Beta concept and problems.

LEARNING OBJECTIVES
 Introducing the Concept of Investment
 To know about the objectives of Investment
 To know about the factors influencing the section of Investment.
 Understanding of Return & Risk

Meaning of Investment: Investment or investing is a term with several closely-related

meaning in business management, finance, and economics, related to saving or deferring
consumption. Investment is the choice by the individual to risk his savings with the hope
of gain. Investment is an activity that is undertaken by those who have savings. Savings
can be defined as the excess of income over expenditure.

A debt security is a financial instrument that represents money that the issuer, usually a firm or
government, has borrowed and that must be paid back over a predetermined amount of
time with interest. These securities are bought by investors as an investment. Commercial paper,
notes, bonds, and debentures are examples of debt securities. Because they give investors regular
interest payments until maturity, when the principal is returned, they are regarded as fixed-income
investments. These assets are often traded on financial markets, giving investors the liquidity to buy
and sell them before they mature. In order to assist investors in determining the risk involved in
investing in them, credit rating organizations typically assign them a rating based on the
creditworthiness of the issuer.

Common stock(Equity), sometimes referred to as ordinary shares or equity shares,

are certificates of ownership in a business. Acquiring equity shares entitles you to a share of the
company's profits, usually in the form of dividends, as well as voting rights over corporate decisions.
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 Security Analysis and Portfolio Management Vth Sem BBA

Ownership: The company's equity stockholders are entitled to ownership. In the event of
a liquidation, they are entitled to the company's assets after all liabilities are paid off.
Dividends: Businesses may pay out dividends to equity shareholders from a percentage of
their profits. Dividend payments, however, are not assured and are left up to the management
of the business.
Voting Rights: Typically, equity shareholders are entitled to cast ballots on issues pertaining
to the corporation, such as elections.
Risk and Return: Investing in equity shares is riskier than debt instruments because equity share
values are subject to fluctuations in the performance of the firm and the state of the market. They do,
however, also provide the possibility of larger rewards, including capital appreciation should the
business expand and appreciate in value over time.
Equity shareholders are entitled to whatever remains after other claims, such as debt repayment and
dividends on preferred shares, are met. This is known as the residual claim on the company's earnings
and assets.
Liquidity: Since equity shares are easily bought and sold, investors have access to liquidity thanks to
the frequent trading of these shares on stock markets.
Derivatives:
Derivatives are financial instruments that, in the stock market, are based on the value of an underlying
asset—in this example, stocks or stock indexes. They provide a number of functions, such as acquiring
exposure to equities without actually owning them, speculating on price movements, and hedging
against price swings.
Derivatives kinds include:
Options: An option gives its holder the right, but not the responsibility, to purchase (call) or sell (put) a
certain stock within a specified time period at a predefined price (the strike price). Options are
frequently used to speculate on potential future price movements as well as to hedge against market
fluctuations.
Futures: Futures contracts bind the seller or the buyer to sell a certain amount of stock at a fixed price
on a prearranged future date. Futures contracts are frequently used to increase exposure to equities
with leverage and to hedge against price swings.
Forwards are contracts that, like futures contracts, commit parties to the purchase or sale of a certain
amount of stock at a fixed price at a later time. On the other hand, futures are standardized contracts
exchanged on exchanges, whereas forwards are customisable and traded over-the-counter (OTC).
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 Security Analysis and Portfolio Management Vth Sem BBA

Swaps: Based on changes in stock prices, stock swaps entail switching from one stream of cash flows
to another. They can be applied to a number of tasks, such as managing currency and interest rate
risks.

Financial Investment:
Financial Instruments:
Tradeable and settleable monetary contracts between parties are known as financial instruments.
These instruments could be money, proof of ownership in a company, or a legally binding agreement to
accept or provide money or another financial instrument.

Types of Financial Instruments

Equity Instruments:

1. Stocks: Shares that represent ownership in a company.

2. Preferred Stocks: Shares with fixed dividends and priority over common stocks in the event of
liquidation.

Debt Instruments:

1. Bonds: Long-term debt securities issued by corporations, governments, or municipalities.

2. Certificates of Deposit (CDs): Time deposits offered by banks with a fixed interest rate.
3. Treasury Securities: Government-issued debt instruments (T-Bills, T-Notes, T-Bonds).
4. Commercial Paper: Short-term unsecured promissory notes issued by companies.

Derivative Instruments:

1. Options: Contracts that give the right, but not the obligation, to buy or sell an asset at a
specified price before a certain date.
2. Futures: Contracts obligating the buyer to purchase, or the seller to sell, an asset at a
predetermined future date and price.
3. Swaps: Contracts to exchange cash flows or other financial instruments between parties.
4. Forwards: Customized contracts between two parties to buy or sell an asset at a specified
future date for a price agreed upon today.

Hybrid Instruments:

1. Convertible Bonds: Bonds that can be converted into a predetermined number of the issuer’s
equity shares.
2. Exchangeable Bonds: Bonds that can be exchanged for shares of a company other than the
issuer.

Money Market Instruments:

1. Treasury Bills (T-Bills): Short-term government securities with maturities of one year or less.
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 Security Analysis and Portfolio Management Vth Sem BBA

2. Repurchase Agreements (Repos): Short-term borrowing for dealers in government securities.

Foreign Exchange Instruments:

1. Currency Swaps: Agreements to exchange principal and interest in one currency for the same
in another currency.
2. Forex Contracts: Agreements to exchange currency at a specified date and price.

Investment Funds:

1. Mutual Funds: Pooled funds from many investors to buy a diversified portfolio of securities.
2. Exchange-Traded Funds (ETFs): Funds that track indices, commodities, or baskets of assets and
trade on stock exchanges.
3. Hedge Funds: Private investment funds that use various strategies to earn active returns for
their investors.

Investment and Speculation

Investment Speculation
Risk Limited risk High
Return Moderate returns High profits and high gains
Time Long term Short term
Use of funds Own funds through savings Own and borrowed funds
Decisions Safety liquidity, profitability Market behavior information
and stability consideration judgment on movement in the stock
market.

Investment Vs Gambling
Investment can also to be distinguished from gambling. Examples of gambling are horse race,
card games, lotteries, and so on. Gambling involves high risk not only for high returns but also
for the associated excitement. Gambling is unplanned and unscientific, without the
knowledge of the nature of the risk involved. It is surrounded by uncertainty and a gambling
decision is taken on unfounded market tips and rumors. In gambling, artificial and
unnecessary risks are created for increasing the returns.
Investment is an attempt to carefully plan, evaluate, and allocate funds to various
investment outlets that offer safety of principal and expected returns over a long period of
time. Hence, gambling is quite the opposite of investment even though the stock market has
been referred to as a “gambling den”.

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 Security Analysis and Portfolio Management Vth Sem BBA

Characteristics of investment
The features of economic and financial investments can be summarized as return, risk,
safety, and liquidity.
Return: All investments are characterized by the expectation of a return. In fact,
investments are made with the primary objective of deriving a return. The expectation of a
return may be from income (yield) as well as through capital appreciation. Capital
appreciation is the difference between the sale price and the purchase price of the
investment. The dividend or interest from the investment is the yield. Different types of
investments promise different rates of return. The expectation of return from an investment
depends upon the nature of investment, maturity period, market demand, and so on. The
purpose for which the investment is put to use influences, to a large extent, the expectation
of return of the investors. Investment in high growth potential sectors would certainly
increase such expectations. The longer the maturity period, the longer is the duration for
which the investor parts with the value of the investment. Hence, the investor would expect
a higher return from such investments.
Risk: Risk is inherent in any investment. Risk may relate to loss of capital, delay in repayment
of capital, non-payment of interest, or variability of returns. While some investments such
as government securities and bank deposits are almost without risk, others are more risky.
The risk of an investment is determined by the investment’s maturity period repayment
capacity, nature of return commitment, and so on.
The longer the maturity period, greater is the risk. When the expected time in which the
investment has to be returned is a long duration, say 10 years, instead of five years, the
uncertainty surrounding the return flow from the investment increases. This uncertainty
leads to a higher risk level for the investment with longer maturity rather than on an
investment with shorter maturity.

Safety: The safety of investment is identified with the certainty of return of capital without
loss of money or time. Safety is another feature that an investor desires from investments.
Every investor expects to get back the initial capital on maturity without loss and without
delay. Investment safety is gauged through the reputation established by the borrower of
funds. A highly reputed and successful corporate entity assures the investors of their initial
capital. For example, investment is considered safe especially when it is made in securities
issued by the government of a developed nation.
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 Security Analysis and Portfolio Management Vth Sem BBA

Liquidity: An investment that is easily saleable or marketable without loss of money and
without loss of time is said to possess the characteristic of liquidity. Some investments such
as deposits in unknown corporate entities, bank deposits, post office deposits, national
savings certificate, and so on are not marketable. There is no well-established trading
mechanism that helps the investors of these instruments to subsequently buy/sell them
frequently from a market. Investment instruments such as preference shares and
debentures (listed on a stock exchange) are marketable. The extent of trading, however,
depends on the demand and supply of such instruments in the market for the investors.
Equity shares of companies listed on recognized stock exchanges are easily marketable.
A well-developed secondary market for securities increases the liquidity of the instruments
traded therein. An investor tends to prefer maximization of expected return, minimization
of risk, safety of funds, and liquidity of investments.
Objectives of Investment
Income: investments are made with the expectation of earning regular income through
dividend or interest. The investment should be made in such a manner that investors get
stable income. An investment is said to be stable, only when it is able to generate a constant
stream of dividend or interest.
Capital Appreciation: it refers to increase in the value of investment held. The investment
should be made in those avenues that have the feasibility of having capital appreciation. It is
determined by taking into consideration the difference between the value of an investment
today and the value when the investment at the beginning over the value of investment at
the beginning
Minimum Risk: Risk may be understood as the probability that actual returns realized from
an investment may be different from expected return. An investor generally commits his
funds to low-risk investments. Each investor tries to maximize his welfare by choosing the
optimum combination of risk and expected return in accordance with his preference and
capacity.

Hedge against Inflation: Cash is idle resource, which does not add up to an investor’s
earnings. It also loses its value to the extent of rise in prices. An inflationary tendency
prevailing in the economy erodes the value of money. Savings are invested to provide a
hedge against inflation.
Tax advantage: Most of the investors try to reduce their tax liability via tax planning and
management. They seek to invest in those avenues which provide them maximum tax
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 Security Analysis and Portfolio Management Vth Sem BBA

advantage. Dividends from shares, insurance premium paid on life insurance policies,
interest on bank deposits and others provide tax benefits.
Investment Process
The investment process consists following five –step procedure:
A. ​ Investment policy should be set: the investment process start by identifying goals and
creating a new plan and policy. Investment policy involves determining the investment
objectives and amount of one's investable wealth. The plan may consist of many future
funding needs such as retirement, college education, and land purchase. The investment
policy qualifies the investment goal. Making money alone cannot be an appropriate
objective. It is appropriate to state that the objective is to make a lot of money by
recognizing the possible losses. A clear investment policy help to plan, implement and
manage portfolio that achieve high return while controlling risk. Policies assist in strategic
assets allocation. Setting a clear investment policy also involves the identification of
potential categories of financial assets for consideration in ultimate portfolio. The
identification of assets depends upon many things such as investment objectives, investable
wealth, tax consideration, retirement, education expenses, mortgage, stocks, bonds, mutual
funds, pensions, social security etc.
B. Performing security analysis: There are thousands of securities to purchase on the financial
markets. So these securities must be analyzed. Analyzing securities is to find out the mis-
priced securities. Performance analysis of security is carried out through.
1) Stock screening by considering earning growth, recent earnings surprises, price /earnings
ratio, dividends, market cap or size, industry, relative strength of each stock.
2) Stock Research: Stock research is carried out after narrow down the list of stock by stock
screening. There is availability of great resources for researching stocks. Company's annual
report and its financial statement are used for financial resources as:
3) Analysis: Many approaches can be used to analyze the securities. These approaches, in
broad sense, can be classified into two types.
i) Technical Analysis: Technical Analysis of security prices involves the study of previous
market price in an attempt to predict the future price movement. Technical analysis ignores
the company underlying the stock and instead tries to predict price changes by studying the
market itself. In technical Analysis past trends in the price is examined and is compared with
the recent emerging trends. The matching of emerging trends or patterns with the past one
patterns repeat themselves. Moving averages, support, and resistance, advance/decline lines,
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 Security Analysis and Portfolio Management Vth Sem BBA

relative, strength, momentum and volume of trading are examined in the technical Analysis.
ii) ​ Fundamental Analysis: Fundamental analysis tries to identify the real or true value of
financial assets. The real value of any kind of financial assets is the present value of the
future cash flow given by the assets or expected by the holder. Fundamental analysis
evaluates a stock by examining the company, especially its operations and its financial
conditions. In fundamental analysis several valuation methods, factoring in P/E ratio,
dividend yields, book value, price/sales ratio, return on equity etc. are looked. The
fundamental analyst attempts to forecast the timing and size of the cash flows and then
converts them into their equivalent present value by using appropriate discount rate.

C. Asset Allocation and Portfolio Construction: Assets allocation is based on investment

goals, Investor experience, and risk tolerance. Assets allocation is putting savings into
investments, as opposed to letting it sit in bank. Dividing your money across different assets
classes (stocks, bonds, money, market etc.) is the first step when making investments and is
arguably the most important decision. A well-constructed portfolio help investors archive at
desired investment goals. The portfolio construction should ensure the optimum use of
people, money, and other resources.
Assets allocation and portfolio construction is of two types- active and passive. Active
assets allocation and portfolio construction is based on market views.
D. Portfolio Revision: Portfolio revision is the repetition of previous three steps of
investment process. Over the period of time, the objectives of investor at may change and
the current portfolio may no longer be optimal. Portfolio revision is the evaluation of
outcome with the help of performance measures. Thus it can be said that portfolio revision is
the art of optimizing assets and raising the worth of a portfolio. A timely revision of portfolio
helps in obtaining maximum profit because:
- The investor can sell some unattractive securities and introduce attractive ones to form a
new optimal portfolio.
- Some securities that are initially unattractive may turn out to be attractive later and Vice-
Versa.
E. ​ Portfolio performance evaluation: The last step in investment process is portfolio
performance evaluation. This step gives the answer of the question. “How the portfolio
performed?" the performance of portfolio should be evaluated in term of return earned and
the risk experienced by the investor. For evaluation of portfolio performance, appropriate
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 Security Analysis and Portfolio Management Vth Sem BBA

measures of return and risk is needed. Evaluation must be carried out by relevant standards.

RETURNS:
Returns refer to income or revenue generated on employment of fund. The
returns are divided into
1. Revenue Returns.
2. Capital Returns.
3. Total Returns / Maximum / Holding Returns.
4. Real Rate of Returns.

1. Revenue Returns: It refers to dividend or interest received by the investor.

The Revenue Returns are calculated
RR = (Dividend / Price of Share) *100
2. Capital Returns: It refers to the returns generated out of the sales of securities.
The Capital Returns are calculated
CR = (End Price of Share – Beginning Price / Beginning Price) *100
3. Total Returns / Maximum / Holding Returns: It refers to the total returns that is generated during
the period of time, which includes Capital & Revenue Returns.
TR/MR/HR = (P1-P0) + Dividend / Po) *100
P1 – refers to end price.
P0 – refers to beginning price.
4. Real Rate of Returns: It refers to the rate of return which is calculated based on the inflation rate.
Real Rate of Returns are calculated:
RR = {1+r/1+IR} – 1
r = refers to returns.
IR = Inflation rate.

PRACTICAL PROBLEMS
1. If an investor makes an investment of Rs 1,00,000 on 1st Sept 2017 when the price of the
share of Dixon Technologies a was Rs 529.75 and as on 24th May 2024 the price of the
same security is Rs 9,298.20. What is the capital returns of the investor?
2. There are two securities Sun Pharma and Lupin with the following price at the beginning
and the end of the year. Calculate the Holding Returns of both the securities and also
suggest which security is better to invest.
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 Security Analysis and Portfolio Management Vth Sem BBA

Securities Sun Pharma Lupin

3rd Sept 2001 Rs 13.30 Rs 6.45
24th May 2024 Rs 1,486.70 Rs 1,614.35
Total Dividend paid from 2001 to 2024 Rs 132.75 Rs 134.70

3. Calculate the Total Returns of the securities Tata Steel & Tata Motors.

Securities Tata Steel Tata Motors

3rd Sept 2001 Rs 3.89 Rs 12.77
24th May 2024 Rs 175.50 Rs 960.55
% of Dividend till date 3,265% 1,595%
Face Value of Equity Share Rs 1 Rs 2.00

4. An investor wants to know which of the following securities would have yield good rate of
return, from the following details, compute Rate of Return & Suggest.

SML
Securities Eicher Motors Ashok Leyland Isuzu Ltd MRF
25th November 2008 Rs 280 Rs 6.90 Rs 214 Rs 1,985
24 th May 2024 Rs 4880.95 Rs 210.70 Rs 2,667.60 Rs 1,31,039.55
Dividend till date 24
May 2024 (%) 14,490% 2,574% 590% 10,830%

Face Value of Equity Rs 1.00 Rs 1.00 Rs 10.00 Rs 10.00

5. Which of the following securities have given the highest Holding Returns.

Securities Rain Industries J K Tyres Bharat Forge Ltd.

24 May 2023
th
Rs 147.35 Rs 181.80 Rs 762.15
24th May 2024 Rs 169.85 Rs 415.95 Rs 1573.50
Dividend for the year 2018 (%) 100% 75% 225%
Face Value Rs 2.00 Rs 2.00 Rs 2.00

6. An investor wants to know which of the following securities will yield good rate of return
when invested for one time horizon of 1 year. From the following Compute Rate of Return.

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 Security Analysis and Portfolio Management Vth Sem BBA

Jindal Stainless Steel Authority of

Steel India Ltd
Securities JSW Steel Ltd
(Hisar)Ltd (SAIL)
Year 2023 Rs 291.90 Rs 696 Rs 82.50
Year 2024 Rs 722.40 Rs 908.65 Rs 169.50
Dividend for the year
50% 0% 15%
2023-2024 (%)
Face Value Rs 2.00 Rs 1.00 Rs 10.00

7. From the following calculate the Average Rate Return of HAL for Year 2023 - 2024:

May- Jun- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May-
Date Jul-23
23 23 23 23 23 23 23 24 24 24 24 24
Close
1,559 1,896 1,981 1,950 1,928 1,823 2,380 2,804 2,999 3,084 3,327 3,939 5,167
Price

8. From the following calculate the Average Rate Return of TCS & INFOSYS for Year 2023-
2024. Suggest which company is better.

Month/ May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May-
Co., 23 23 23 23 23 23 23 23 24 24 24 24 24

TCS 3,290 3,302 3,421 3,357 3,529 3,369 3,488 3,793 3,816 4,095 3,876 3,821 3,850

Infosys
1,318 1,336 1,356 1,435 1,435 1,368 1,455 1,543 1,661 1,674 1,498 1,421 1,465

9. From the following calculate the Average Rate Return & Real Rate of Return, MAHINDRA
& MAHINDRA Ltd & TVS Ltd for the Year 2023-2024. Suggest which company is better.
The average inflation rate for the year 2023-2024 is 4.83%.

Year May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24

M&M 1,319 1,454 1,475 1,575 1,554 1,459 1,648 1,729 1,652 1,932 1,921 2,156 2,549
TVS 1,303 1,326 1,377 1,420 1,522 1,591 1,865 2,026 2,001 2,139 2,152 2,060 2,250

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 Security Analysis and Portfolio Management Vth Sem BBA

10. From the following calculate the Average Rate Return & Real Rate of Return from 2014
to 2024 of Kaveri Seed Company Ltd. The average inflation rate for the year 2024 is 4.83%.
The Investor has purchased in the year 2008 (invested) 1,000 shares at Rs.26 per share.

Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Closing Price 771 351 410 548 575 509 520 571 517 613 852

11. From the following information calculate return and real rate of return and suggest
which company is better. The inflation rate during the year 2024 was 4.83%

Face Value % of Dividend Declared Beginning Price (Rs.) End Price (Rs.)
Company

TCS Rs 1 4350% 2,200 2,400

ITC Rs 1 850% 280 320

COAL INDIA Rs10 274% 280 310

SBI Rs 1 260% 176 320

CORPORATION
Rs 2 0% 38 42
BANK

RISK: Company analysis involves not only an estimation of future returns, but also an
assessment of the variability in returns called risk.
Standard Deviation: The positive square root of the variance is the standard deviation. One
of the most basic approaches of statistical analysis is standard deviation. The standard
deviation, abbreviated as SD and represented by the letter ", indicates how far a value has
varied from the mean value. A low standard deviation indicates that the values are close to
the mean, whereas a large standard deviation indicates that the values are significantly
different from the mean. Let's look at how to determine the standard deviation of grouped
and ungrouped data, as well as the random variable's standard deviation. The risk is
measured based on standard deviation, which refers to the deviation from the mean returns.
Higher the deviation higher the risk & higher return & vice versa. It can be calculated with
the help of the following formula.
σ = √ (∑x−x¯)2 /n)

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 Security Analysis and Portfolio Management Vth Sem BBA

Problems:

1. From the following data, Calculate the Average Return, Variance & Standard Deviation
(Risk). CARE Rating Ltd.

May Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May-
Date
-23 23 23 23 23 23 23 23 24 24 24 24 24

Closing
635 702 732 832 877 910 915 952 1,031 1,161 1,119 1,195 1,022
Price

2. From the following Calculate Average Returns and Standard Deviation (Risk) of
Godrej Propoerties & Prestige Estate.
Year 2016 2017 2018 2019 2020 2021 2022 2023 2024

Godrej
Propoerties 303 693 653 988 1,432 1,872 1,225 2,013 2,722
Close Price

Prestige
Estate 170 318 220 338 266 475 464 1,179 1,538
Close Price

3. Calculate the Average Returns and Standard Deviation (Risk) of Zydus Ltd &
Abbott India Ltd.

Year 2016 2017 2018 2019 2020 2021 2022 2023 2024

Zydus
Close 357 434 348 254 477 483 420 689 1,024
Price
Abbott
India
4,722 5,525 7,517 13,076 15,769 19,486 21,367 22,851 25,991
Close
Price

4. From the following Calculate the Expected Return, Variance & Standard Deviation.

YEAR 2018 2019 2020 2021 2022 2023

ALBERT DAVID
4.390% 14.979% 4.973% 6.205% 35.742% -5.024%
LTD. Return (%)
Probability / Weights
0.1 0.1 0.3 0.2 0.1 0.2

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 Security Analysis and Portfolio Management Vth Sem BBA

5. From the following Calculate the Expected Return, Standard Deviation (Risk) of Nath
Bio Genes (India) Ltd.
Nath Bio Genes (India) Ltd Probability /
YEAR
Expected Return (%) Weights
2019 148.40 0.25
2020 -37.16 0.20
2021 92.38 0.30
2022 212.55 0.15
2023 10.95 0.10

CORRELATION:

Correlation coefficient measures the degree to which two variables move together. Its value
ranges between -1 and 1. -1 indicates perfectly negative relationship, 1 shows a perfectly
positive relationship and zero means there is no relationship between the variables.
Correlation coefficient refers to the relationship between two variables where one is
considered as dependent variable and other as an independent variable. Correlation
coefficient is a very important number in finance because it helps tell whether there is a
relationship between say population growth and GDP growth, crude oil price and stock price
of oil and gas companies, a mutual fund and the broad market index, etc. Two variables
might have a very high correlation, but it might not necessarily mean that one causes the
other. The most common measure of correlation is called the Pearson correlation which can
be calculated using the following formula:

1. From the following Calculate Correlation between ICICI Bank Stock Price and Bank
Nifty Index which is given for 10 months.
Month Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24
Bank
Nifty
43,989 44,585 42,846 44,482 48,292 45,997 46,121 47,125 49,397 48,682
Close
Price
ICICI
Bank
959 952 915 935 997 1,028 1,052 1,093 1,150 1,114
Close
Price

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 Security Analysis and Portfolio Management Vth Sem BBA

2. Calculate the Correlation between BSE Index and Transchem Ltd.

Month Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24
Transchem Ltd
24.9 23.44 24.13 25.31 26.7 42.62 34.41 28.07 45.5 36.05
Close Price
BSE Index Close
64,831 65,828 63,875 66,988 72,240 71,752 72,500 73,651 74,483 73,961
Price

3. Calculate the Correlation between the NSE Index and BSE Index.

Date Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24

NSE
Index 19,080 20,133 21,731 21,726 21,983 22,327 22,605 22,531
BSE
Index
Close
63,875 66,988 72,240 71,752 72,500 73,651 74,483 73,961
Price

4. calculate the correlation between the NSE Index and Yes Bank Stock Price &
Comment.

Date 22-05-2024 23-05-2024 24-05-2024 27-05-2024 28-05-2024 29-05-2024 30-05-2024 31-05-2024

State
Bank of
India 819 832 829 834 831 823 826 830
Close
Price
NSE
Index
Close
22,598 22,968 22,957 22,932 22,888 22,705 22,489 22,531
Price

BETA: Beta is a measure of a stock’s systematic risk. It is estimated by comparing the

sensitivity of a stock’s return to the broad market return. The broad market has a beta of 1
and a stock’s beta of less than 1 means that it has lower systematic risk than the market and
vice versa. The market beta i.e. the average beta of all the investments that are out there is 1
and an individual investment’s systematic risk is measured relative to the overall market risk.
A beta of more than 1 means that the investment has higher exposure to systematic risk than
the market in general and a beta less than 1 means that the investment is less exposed to
the systematic risk factors. It is calculated with help of the following:

N ∑XY – (∑X) ( ∑Y)

β = -------------------------
N ∑X2 – (∑X)2

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This module is strictly for private circulation of JU-CMS only, compiled by R Thanga Kumar
 Security Analysis and Portfolio Management Vth Sem BBA

1. From the following Calculate Beta.

Date Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24

Maruti
Suzuki
Ltd 10,392 10,609 10,302 10,187 11,288 12,600 12,818 12,399
NSE
Index
19,080 20,133 21,731 21,726 21,983 22,327 22,605 22,531

2. From the following Calculate Beta.

Year 2018 2019 2020 2021 2022 2023 2024

TCS Ltd 1,893 2,162 2,863 3,738 3,257 3,793 3,671
NSE Index 10,863 12,168 13,982 17,354 18,105 21,731 22,531

3. From the following data Calculate Beta.

Month Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24
Mangalam
Seeds Ltd 240 226 220 214 226 225 258 305 254 305 248
BSE Index 66,528 64,831 65,828 63,875 66,988 72,240 71,752 72,500 73,651 74,483 73,961

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This module is strictly for private circulation of JU-CMS only, compiled by R Thanga Kumar